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Israel, Geopolitical Risks, and Market Response · 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: Right now, we want to get to the ground in
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Speaker 1: Tel Aviv. We're joined by Galit Alstein. She is the
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Speaker 1: economic and government reporter with Bloomberg News based in Tel Aviv. Galit,
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Speaker 1: thanks so much for joining us. I know this is
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Speaker 1: an incredibly difficult time for everyone in that part of
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Speaker 1: the world. What can you tell us about the latest
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Speaker 1: reporting on the ground.
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Speaker 3: So basically we're looking at a couple of things here
0:50
Speaker 3: on the southern front of Israel, which is in the
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Speaker 3: Gaza vicinity. Until this morning at least, there were still
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Speaker 3: infiltrations of AMAS militant attackers who went to managed to
1:03
Speaker 3: come through the fence. This was on a much lower
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Speaker 3: scale than it obviously was on Saturday when they came by,
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Speaker 3: as it turns out, by the hundreds. By the way,
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Speaker 3: the ideas is talking about one thousand hamas attackers who
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Speaker 3: came who broke the fence and just went into Israel
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Speaker 3: on Saturday morning. So what I started saying is that
1:25
Speaker 3: until this morning, we were still seeing infiltrations on a
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Speaker 3: much smaller scale, and there were still combat arenas in
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Speaker 3: the south of Israel, with defense forces trying to get
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Speaker 3: hold of Israelis, Israeli communities and settlements in the south
1:41
Speaker 3: of Israel and trying to sort of, you know, clean
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Speaker 3: them of potential you know, attackers there and at the
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Speaker 3: same time trying to evacuate a lot of the not
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Speaker 3: a lot of actually most of the settlements, Israeli settlements
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Speaker 3: and communities were just by the Gaza fence, about twenty
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Speaker 3: four of them, I think, and I think that so
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Speaker 3: far fifteen have been evacuated and they're still working on
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Speaker 3: the rest. So that is what is going on on
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Speaker 3: the south of Israel later on today, and that is
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Speaker 3: basically under control at this time. In the North of Israel,
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Speaker 3: it has been relatively quiet until this afternoon. It is
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Speaker 3: still not not a very bad situation there, but we
2:31
Speaker 3: have seen a bit of mortar fire fired from Lebanon,
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Speaker 3: and there were also there was also a very minor
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Speaker 3: infiltration and the idea DS. I'm just I'm looking at
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Speaker 3: my phone to be exact, and what they said. They
2:45
Speaker 3: did put out a message about a couple of hours
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Speaker 3: ago that they had killed a number of armed suspects
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Speaker 3: that infiltrated into Israel from Lebanese territory. Isbela has denied
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Speaker 3: connection with this, which is important because you know, everyone
3:01
Speaker 3: is also now looking at Frizabella to see if they
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Speaker 3: will join the attacks on Israel to form like a
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Speaker 3: sort of multifront arena.
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Speaker 2: Can I ask Matt Miller here in New York and
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Speaker 2: really appreciate you joining us, and I understand how difficult
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Speaker 2: it must be to report on this right now, But
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Speaker 2: what do we know about Israel's plans to go into Gaza?
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Speaker 2: And how are you know, uh, you know, civilians in
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Speaker 2: Gaza going to get out because of course they've got
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Speaker 2: borders on all sides and the ocean and the med
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Speaker 2: so it seems like they're stuck. How can they get
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Speaker 2: out if Israel's going to sweep in militarily.
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Speaker 3: Yeah, so this is a very good question because you know, Matt,
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Speaker 3: we've been hearing idea for officials who have been briefing
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Speaker 3: journalists about twice or more than that every day, and
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Speaker 3: just this morning of the idea of spokes on people
4:02
Speaker 3: told us some journalists that they will be evacuating Gaza
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Speaker 3: when asked if Israel will actually be evacuating Gaza, because
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Speaker 3: Israel does not you know, does not control Gaza at
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Speaker 3: this time, so he said no, but we will recommend
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Speaker 3: they evacuate, you know, on their own. And this is
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Speaker 3: a very good question that has not been answered answered
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Speaker 3: yet and this is definitely something to keep pushing the
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Speaker 3: ideas to give answers on because the answer to that
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Speaker 3: is not clear. Although the idea is saying we will
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Speaker 3: want people to evacuate, we do not know how. We
4:39
Speaker 3: do know that at this time the Gaza Strip has
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Speaker 3: been cut off from electricity of supply, water supply, fuel supply,
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Speaker 3: and other supplies as well because all passages have been
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Speaker 3: shut down. One of the main passages, by the way,
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Speaker 3: the Arrest passage, was one of the breach points through
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Speaker 3: which the attackers came through on Saturday, and Idea of
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Speaker 3: officials have been telling us on record, we're not in
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Speaker 3: a hurry, you know, to rebuild this passage because this
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Speaker 3: is what it was used for.
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Speaker 1: So what do we know about the hostages and maybe
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Speaker 1: any plans to get them back?
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Speaker 3: Yeah, So so you know, obviously, you know, all sides
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Speaker 3: are keeping their cards very very very close to their
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Speaker 3: chests at this point. There have been various reports today
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Speaker 3: about about some sort of negotiations going on, mainly negotiations
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Speaker 3: to free women and children who were taken hostage into
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Speaker 3: Gaza in turn for for women prisoners of Hamas that
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Speaker 3: are being held in Israel. An official Israeli source, high
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Speaker 3: ranking official Israeli source who asked not to be named,
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Speaker 3: but he had he has denied that explicitly, and I
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Speaker 3: think that Hama, although to be frank, I'm not sure
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Speaker 3: who in Hamas have also just over the past hour
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Speaker 3: deny that there's any negotiations going on. So it's nothing
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Speaker 3: very firm, you know, that is going on at this stage.
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Speaker 1: All right, Glit, thank you so much for joining us.
6:14
Speaker 1: We know it's very very difficult time and we appreciate
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Speaker 1: getting some of your time in your reporting. Galitz Altstein
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Speaker 1: israel economy and government reporter with Bloomberg News based in
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Speaker 1: Tel Aviv. So we will continue to bring you the
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Speaker 1: latest reporting on this situation.
6:29
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6:44
Speaker 1: You want to continue to follow the story in Israel,
6:47
Speaker 1: the war there with Hamas militants. Roz Mathieson joins us.
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Speaker 1: She's the news director for e m e A Europe,
6:55
Speaker 1: Middle East and Africa for Bloomberg News based in I
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Speaker 1: think London. Roz, thanks so much for joining us. I
7:01
Speaker 1: know it's a busy, busy time here. I guess one
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Speaker 1: of the questions over here that a lot of folks
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Speaker 1: are asking, I'm sure it's the same there is just
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Speaker 1: how did this happen? What happened to the vaunted intelligence
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Speaker 1: of not only Israel but everybody else in that part
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Speaker 1: of the world, including the US and the West.
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Speaker 6: Well, that is the ultimate question, and it may take
7:20
Speaker 6: weeks or even months until we understand some of that, because,
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Speaker 6: as you can say, this seems to have been an
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Speaker 6: absolute surprise very early on Saturday morning that this kind
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Speaker 6: of infiltration could happen into Israel itself and Israeli intelligence
7:35
Speaker 6: is famed for its ability, They're known for it. They
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Speaker 6: share their intel with their key allies, including the US,
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Speaker 6: and so what went wrong here? Because this operation by
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Speaker 6: Hamas must have been months in the planning. It was
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Speaker 6: very intricate, it was very detailed, it was very carefully
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Speaker 6: carried out. How is it that no one in the
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Speaker 6: Israeli intelligence community got wind of this? And so obviously,
8:00
Speaker 6: you know, lots of questions now that are going on
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Speaker 6: to the Defense Force in all of that, and they're
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Speaker 6: saying it's going to take the weeks, if not months
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Speaker 6: to try and understand where the failures were in this,
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Speaker 6: but obviously very much caught by surprise, and you can see,
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Speaker 6: you know that the perhaps of recriminations that may come
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Speaker 6: from that down the track, including for the Prime Minister
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Speaker 6: Benjamin Netanyahu right now the country very much rallying behind
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Speaker 6: him in this moment, but there are also questions already
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Speaker 6: coming about the failure here of the government to have
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Speaker 6: known about this.
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Speaker 2: So Ras, as far as we know now, you had
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Speaker 2: this multi point breach of the Israeli border, right the
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Speaker 2: attacks and also hostage taking. Did the did the I
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Speaker 2: guess attackers then pull back into Gaza and other sort
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Speaker 2: of cross border areas, and does it look like they're
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Speaker 2: trying to draw Israeli forces into those areas well.
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Speaker 6: In fact, if anything, they seem to have been trying
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Speaker 6: to push further into some Jewish communities that are in
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Speaker 6: that area that's very close to the Gaza Strip and
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Speaker 6: in the south of Israel, and trying to push on
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Speaker 6: into communities and towns. And some of that is about
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Speaker 6: attacking Israeli military posts in the area. Some of it
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Speaker 6: has been unfortunate, attacking civilians in the area, and in
9:23
Speaker 6: some cases, you say, taking those civilians back into the
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Speaker 6: Gaza Strip for whatever reason. Is that to use them
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Speaker 6: as hostages for whatever purposes, but certainly drawing some of
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Speaker 6: them back into the Gaza area. So it's about sort
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Speaker 6: of just sending the message to Israel, you know what,
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Speaker 6: you're not safe inside your own border.
9:41
Speaker 7: We can come for you, and we will.
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Speaker 6: But it's also about sort of using hostages for sort
9:47
Speaker 6: of further purposes as this conflict goes on. I mean,
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Speaker 6: there are real pressions about whether this now leads to
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Speaker 6: a full scale ground invasion by Israel of Palestine territories,
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Speaker 6: including the Gaza Strip. So the purpose of those hostages. Well,
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Speaker 6: one can only guess at that.
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Speaker 2: Do we know anything about personnel numbers, how many the
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Speaker 2: attackers had, and do we know anything about you know, equipment.
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Speaker 2: I imagine they weren't coming in tanks, just shoulder launch
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Speaker 2: rockets and you know, in machine guns or what do
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Speaker 2: we know about that sort of thing?
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Speaker 8: Well?
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Speaker 6: Interesting, it was a fairly sophisticated operation. In Hamas has
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Speaker 6: been fighting in some measure for decades against Israel, and
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Speaker 6: they're supported. They've been supported over the years financially and
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Speaker 6: in other ways by Iran.
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Speaker 7: Of course, there are questions about how much around may or.
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Speaker 6: May not have been involved in this particular episode that
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Speaker 6: we're seeing now, but these are sort of been carrying
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Speaker 6: out guerrilla warfare of some of some extent, you know,
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Speaker 6: for years, so they're very highly trained. There are apparently
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Speaker 6: systems of tunnels they may have used. They use mechanized
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Speaker 6: parachutes to literally parachute themselves into into Israeli territory. And
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Speaker 6: quite an organized, coordinated operation. So this is not just
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Speaker 6: sort of random groups roaming around it. It is quite
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Speaker 6: organized and sophisticated.
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Speaker 1: So as we've seen video coverage of you know, it
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Speaker 1: seems like tanks massing on personnel carriers massing on Israeli side.
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Speaker 1: The reports this morning of a call up of three
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Speaker 1: hundred thousand reserves. Is it the expectation that Israel at
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Speaker 1: some point in the near future will make a full
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Speaker 1: scale invasion of that part of Gaza.
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Speaker 6: It's certainly seen as probable. I mean, this is a
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Speaker 6: severe attack on Israel. The high number of civilian casualties
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Speaker 6: that we've seen it will compel the government to act.
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Speaker 7: In the past, they've retaliated in different ways.
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Speaker 6: Maybe they've struck through sort of rocket fire back into
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Speaker 6: the Gaza strip. We're seeing that already. If they blame Iran,
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Speaker 6: they tend to hit Araand's proxies elsewhere in the area.
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Speaker 6: This goes beyond what we've seen in a very long
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Speaker 6: time in terms of the level of the attack on Israel,
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Speaker 6: which will probably lead to a much bigger scale retaliation.
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Speaker 6: And that's why the idea of a full scale ground
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Speaker 6: war now really is on the table. I mean, the
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Speaker 6: Israeli government's talking me about months of campaign here in
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Speaker 6: military campaign. This is not going to be over in
12:21
Speaker 6: the next couple of days. They really are going to
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Speaker 6: turn the screws on Gaza. They're turning the water off,
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Speaker 6: they're turning the power off. They're going to make life
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Speaker 6: for people living in Gaza extremely miserable. So we really
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Speaker 6: are looking at the prospect of a full scale ground
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Speaker 6: war now in the Middle East.
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Speaker 2: I mean, given the size of the attack and the
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Speaker 2: support that Iran has historically provided to Hamas and has Belah,
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Speaker 2: it seems difficult to imagine the Iranians didn't know, even
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Speaker 2: if you maybe say they weren't involved in the actual planning,
12:55
Speaker 2: which the Wall Street Journal has reported that they were
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Speaker 2: courting unidentified members of Comas and Hezbollah. What does this
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Speaker 2: mean for Israel I mean in terms of markets rise?
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Speaker 2: And they hate to bring it back to that, but
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Speaker 2: you know, we've looked at oil coming up roughly four
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Speaker 2: to five percent. If we get solid evidence that Iran
13:17
Speaker 2: is behind this, does that push the price higher? Are
13:21
Speaker 2: there are those flows completely cut off?
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Speaker 6: Well, that becomes a real question right now. What you're seeing,
13:27
Speaker 6: obviously is a reaction in financial markets around.
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Speaker 7: The world, be it riskier assets and also oil.
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Speaker 6: And that's sort of a knee joke response to the
13:36
Speaker 6: extent of the conflict so far.
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Speaker 7: But if you get contagion.
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Speaker 6: Which means you're pulling in other plays in the Middle East,
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Speaker 6: particularly around and.
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Speaker 7: If all supply is affected, because right.
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Speaker 6: Now where we are, there's no disruption to all supply,
13:50
Speaker 6: and so the price move is simply a reaction a
13:53
Speaker 6: question so risk being priced into the market. But if
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Speaker 6: you get to the point that supply is really disrupted
13:58
Speaker 6: through the straits there, I mean Iran has been pumping
14:01
Speaker 6: oil again with the US that of turning a slight
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Speaker 6: blind eye to that, then you're going to get real
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Speaker 6: ishoes about around supply, and that feeds not just into
14:10
Speaker 6: the all MICA but also into broader questions around global inflation,
14:14
Speaker 6: the problems for interest rates around the world, higher for
14:17
Speaker 6: longer for interest rates, so there are real possible contagion
14:21
Speaker 6: effects for markets here in the longer term. And that's
14:23
Speaker 6: what people are really watching is does this stay contained
14:26
Speaker 6: where it is or does it draw in a run
14:29
Speaker 6: and suddenly you've got a much broader regional coldlip that's
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Speaker 6: really affecting things like all supply.
14:34
Speaker 1: Ris to the effect that Israel does in fact amount
14:36
Speaker 1: some type of invasion. Is there any census the timing
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Speaker 1: Is this in a matter of days or is the
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Speaker 1: weeks I just don't how long it takes for them
14:44
Speaker 1: to get mobilized. It seems like Israel would probably be
14:46
Speaker 1: on a high level alert at all times anyway, But
14:48
Speaker 1: do we any sense of timing.
14:51
Speaker 6: It's very unclear and much might depend on how things
14:53
Speaker 6: go in terms of any push by Israel into the
14:56
Speaker 6: Gaza strip, whether Israel takes the initiative and stuff striking
15:00
Speaker 6: targets inside Iran. I mean, they also may opt if
15:04
Speaker 6: they do want to do something against Iran, to hit
15:06
Speaker 6: one of Iran's proxies in the region, which they've done before.
15:10
Speaker 7: There'll be a high level of caution about.
15:11
Speaker 6: Taking that step with Iran, as I said, because that
15:14
Speaker 6: just like escalates significantly the tension in the whole region.
15:19
Speaker 7: And the US and other players.
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Speaker 6: You know, allies of Israel are being very very cautious
15:24
Speaker 6: about that and urging Israel to be careful and walk
15:27
Speaker 6: the steps on this.
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Speaker 7: No one really seems to be agitating.
15:31
Speaker 6: For an immediate strike on Iran, and certainly Iran doesn't
15:35
Speaker 6: seem to be showing an inclination to directly attack Israel.
15:39
Speaker 7: And so that's possibly some way off.
15:41
Speaker 6: We first probably need to see how things play out
15:44
Speaker 6: in the Gaza strip, but certainly it does remain to
15:46
Speaker 6: keep question in the minds of many people is where
15:49
Speaker 6: does this begin and where is it? Where on Earth
15:51
Speaker 6: is it going to end?
15:52
Speaker 2: Just to wrap our heads around this geographically raz does
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Speaker 2: it look like most of the attackers came out of
15:59
Speaker 2: Gaza and missiles coming out of Lebanon at the West
16:04
Speaker 2: Bank and Jerusalem seem problem free at the at the moment.
16:09
Speaker 6: Well, certainly the attacks of mostly come out of Gaza,
16:12
Speaker 6: but we are seeing some skirmishes involving Hesblah, which is
16:16
Speaker 6: obviously from the Lebanon side of things, and we've seen
16:19
Speaker 6: some rockets fired by Hesbealah into Israel.
16:22
Speaker 7: We've seen Israel files and rockets back.
16:24
Speaker 6: We're now seeing reports that a handful of people May
16:27
Speaker 6: Palestines may have attempted. It's across from the Lebanon side
16:31
Speaker 6: into Israel and we're seeing retaliation going on there. So
16:35
Speaker 6: it is happening on both ends, but it's mostly concentrated
16:38
Speaker 6: in the South.
16:39
Speaker 1: Hi Ros, thanks so much for joining us. Roz Mathison,
16:42
Speaker 1: news director for Bloomberg News over in London.
16:44
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16:48
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17:04
Speaker 1: Right now, when we're going to get back to the
17:05
Speaker 1: story at hand, the conflict in Israel, and we're going
17:09
Speaker 1: to do that today with doctor Ariel Cohen, Senior fellow
17:12
Speaker 1: at the Atlantic Council Eurasia Center, also a member of
17:15
Speaker 1: the Council Foreign Relations, someone who's steeped in all things
17:20
Speaker 1: geopolitical issues on that type that part of the world.
17:24
Speaker 1: Doctor Cohen, Thanks for joining us here. We'd love to
17:26
Speaker 1: just we've had a full I guess, twenty four hours
17:29
Speaker 1: to kind of figure out what's going at forty eight
17:30
Speaker 1: hours to figure out what's going on there. What's your
17:33
Speaker 1: I guess initial take, maybe informed take is what we've
17:36
Speaker 1: witnessed since Saturday morning.
17:40
Speaker 9: First of all, we witnessed an attack on Israeli civilians
17:44
Speaker 9: that we did not see that level of death since
17:48
Speaker 9: the Holocaust. Probably in the end of the day it's
17:52
Speaker 9: going to be eight hundred and nine hundred people killed
17:55
Speaker 9: in one day, rape, taking people hostage and prisoner, including
18:02
Speaker 9: little children, murdering.
18:06
Speaker 10: Parents in front of the.
18:08
Speaker 9: Children, put posting rape on social media, desecration of corpses, etc.
18:16
Speaker 10: These are horrifying pictures on the Israeli front.
18:23
Speaker 9: This is the largest Israeli failure since the Yom Kipur War,
18:29
Speaker 9: the October War of nineteen seventy three. The Israeli intelligence,
18:37
Speaker 9: the shin Bed, the Security Service, the Mossad, the external intelligence,
18:43
Speaker 9: and the military intelligence failed to understand what was right
18:47
Speaker 9: in front of them. I was reading newspapers with reports
18:50
Speaker 9: of the meetings of all these organizations with the Iranians
18:55
Speaker 9: Islamic Revolutionary Guard Corps in Beirut and asking a question
18:59
Speaker 9: that the Israeli leaders should have asked, what's.
19:01
Speaker 10: Going on here? Why the meeting?
19:04
Speaker 9: They were meeting weekly or bi weekly in Beirut. They
19:08
Speaker 9: also are connecting through Turkey, which gave shelter to senior
19:13
Speaker 9: Kamas operators. And then the question that I am focused
19:19
Speaker 9: on now is whether he's Balah they fully owned subsidiary
19:23
Speaker 9: of Iranian Revolutionary Guard Corps. The leader of his Bala
19:29
Speaker 9: Sheek Nasa has a title of representative of the Supreme
19:33
Speaker 9: Leader of Iran in Lebanon, Are they entering the frame?
19:37
Speaker 9: If they do, this is a very very serious threat
19:42
Speaker 9: to Israeli existence because his Bala reportedly has between one
19:48
Speaker 9: hundred and two hundred thousand rockets, whereas Kamas was shooting
19:53
Speaker 9: into Israel at a rate of two thousand rockets in
19:57
Speaker 9: twenty minutes. A thousand rockets, what is it a two
20:02
Speaker 9: hundred rockets a minute that the Israeli iron dome system,
20:08
Speaker 9: one of the most advanced of the world, was overwhelmed.
20:12
Speaker 9: Now we may have higher rates of bigger rockets hitting
20:17
Speaker 9: strategic places.
20:18
Speaker 10: Like the refinery in Haifa and turning Israeli cities.
20:24
Speaker 9: Where my relatives live all over the country where I
20:28
Speaker 9: used to live myself, turning that into a fiery inferno.
20:32
Speaker 10: In that case, Israeli leaders, including.
20:35
Speaker 9: The head of the Mossada, David Barnea, about two weeks ago,
20:39
Speaker 9: said that they will have the top leadership of around
20:44
Speaker 9: responsible in Tehran and news flash, Israeli airplanes do not
20:50
Speaker 9: have the range to hit Iran without help from the
20:55
Speaker 9: Arab allies or Arab friends, and if such health will
21:00
Speaker 9: not be forthcoming, Israel may use its rockets, whether land
21:06
Speaker 9: based rockets or rockets, missiles on its submarines, two Hiterranean targets,
21:13
Speaker 9: including Tehran and including the oil terminal in.
21:17
Speaker 1: Barbas, Doctor con what do you expect Israel to do
21:21
Speaker 1: in response? And when do you expect them to do that?
21:25
Speaker 10: They're doing it now.
21:27
Speaker 9: Israel mobilized three hundred thousand of the reserves, that's two
21:34
Speaker 9: thirds of the reserves are mobilized already.
21:37
Speaker 10: The moralist high. I am monitoring.
21:42
Speaker 9: What's up feeds of apartment buildings and relatives and sources,
21:48
Speaker 9: and the morales high. The leadership is trying to figure
21:52
Speaker 9: out what to do, maybe not as fast as we
21:55
Speaker 9: would like. For example, when Tamas was running over the
21:59
Speaker 9: villa and towns in southern Israel and people were stuck
22:04
Speaker 9: under fire, it took sometimes eight to ten hours for
22:08
Speaker 9: security forces to arrive.
22:10
Speaker 10: Now, of course, the response is going to be.
22:12
Speaker 9: Faster, and I'm sure that the Israeli air force and
22:16
Speaker 9: missile forces are getting ready if Habala is involved.
22:21
Speaker 10: And right now these very minutes.
22:25
Speaker 9: We see reports about exchanges of fire along the Lebanese border,
22:30
Speaker 9: and yesterday Tamas was shooting missiles into the Cheba farm
22:35
Speaker 9: area that they claim not the Lebanese government but Chrisbala
22:39
Speaker 9: is claiming a little piece of territory between Israel, Syria
22:44
Speaker 9: and Lebanon. If that escalates, all bets are off. The
22:52
Speaker 9: Bandara bas oil terminal of Iran is in the range
22:56
Speaker 9: of Israeli missiles, the oil prices may jump and the
23:01
Speaker 9: US support. Now we see the carrier battle group moving
23:06
Speaker 9: to eastern Mediterranean in a clear signal to Iran that
23:10
Speaker 9: if they Activatebella, we may see for the first time
23:14
Speaker 9: a joint Israeli American operation against Iranian targets in the
23:19
Speaker 9: Middle East.
23:20
Speaker 10: So I guess.
23:22
Speaker 2: Israeli defense forces would sweep through Gaza and secure the
23:28
Speaker 2: border with the West Bank while they then move north,
23:31
Speaker 2: pushing into Lebanon. Is that the idea Militarily.
23:35
Speaker 9: If Hiszbala opens, Israelis will need to destroy whatever known
23:43
Speaker 9: targets are. The problem in Lebanon is that there are
23:45
Speaker 9: a lot of tunnels. They need to secure the West Bank,
23:48
Speaker 9: not just the line between Israel and the West Bank.
23:53
Speaker 10: This is not recognized international border.
23:56
Speaker 9: Israel occupies parts of the west Bank, but any kind
24:00
Speaker 9: of terrorist activity out of the West Bank should in
24:04
Speaker 9: missiles killing civilians will require a response, and this is
24:08
Speaker 9: a big challenge for small country like Israel, a country
24:11
Speaker 9: is size of New Jersey with population about nine point
24:14
Speaker 9: two million people. That you have an active front in
24:17
Speaker 9: the south in Gaza where a thousand people got killed,
24:22
Speaker 9: You have a very unstable West Bank where Kamas is
24:27
Speaker 9: competing with Palestinian authority for power, and you have Hisbala
24:33
Speaker 9: with fifty thousand fighters and hundreds of thousands of rockets.
24:37
Speaker 10: This is a huge challenge for.
24:38
Speaker 1: Israel, all right, So, doctor Cohen, here is there any
24:44
Speaker 1: appetite for some type of I don't know less lethal
24:48
Speaker 1: type of solution here? Is there any room for that?
24:50
Speaker 1: Is there any psyche for that in Israel at the moment?
24:55
Speaker 10: No. In terms of Gaza, absolutely not.
24:59
Speaker 9: When you see, say, sweep through the Gaza strip, which
25:04
Speaker 9: is not big, it's I think nine by fourteen miles,
25:08
Speaker 9: a lot of it heavily built.
25:10
Speaker 10: The problem is the Israelis are not.
25:14
Speaker 9: Happy to kill civilians, but Hamas deliberately puts its military
25:20
Speaker 9: targets inside mosques, inside schools and hospitals, and there's no
25:25
Speaker 9: choice under international law. If the military targets are within
25:29
Speaker 9: civilian population, you are allowed under the international law to
25:35
Speaker 9: hit the military targets Israelis, for example.
25:38
Speaker 10: Do what they call knock on the roof.
25:39
Speaker 9: They warn the citizens to leave buildings, and sometimes they
25:44
Speaker 9: manage and sometimes Kamas prevents them from leaving.
25:47
Speaker 10: So Gaza is going to be softened as.
25:51
Speaker 9: A target by the air force and artillery before they
25:55
Speaker 9: move in, so sweep, yes, maybe within a week, not immediately,
26:01
Speaker 9: because they do not want to lose their boys and girls. Understandably,
26:05
Speaker 9: we did the same in Iraq. Okay, you don't go
26:08
Speaker 9: in before the targets is suffered. And Withibala, if they
26:13
Speaker 9: really enter the war, they will be bombed and shelled
26:19
Speaker 9: before the land operation begins.
26:22
Speaker 2: Is there, doctor Cohne, Is there any way to evacuate
26:25
Speaker 2: civilians from Gaza at all? Because they have border on
26:30
Speaker 2: all three sides and the Mediterranean on the other.
26:33
Speaker 9: Absolutely, and here the United States, Saudi Arabia and others
26:38
Speaker 9: can do a lot of favor to the civilian population
26:44
Speaker 9: and Goza.
26:44
Speaker 8: Well.
26:45
Speaker 9: First of all, when you say civilians, I would probably
26:49
Speaker 9: focus on women and children first and foremost, because a
26:53
Speaker 9: lot of able bodied men are pressed into membership in
26:58
Speaker 9: Hamas and Islamic JIP and civilians can go into two directions.
27:04
Speaker 9: One open spaces fields, fields and desert land in Gaza
27:13
Speaker 9: and stay there with tents, or.
27:16
Speaker 10: Go to the Egyptian border and convince it.
27:20
Speaker 9: The international community should convince the Egyptians to let the
27:24
Speaker 9: civilians enter and accommodate the civilians.
27:29
Speaker 10: Because we do not want.
27:32
Speaker 9: Any civilian casualtism on eva side Israel or Gaza to
27:38
Speaker 9: be hurt. And then those who remain and fight, their
27:43
Speaker 9: blood is on them. In terms of Lebanon, same thing.
27:46
Speaker 9: Lebanon is much bigger than Gaza. The civilians should exit
27:51
Speaker 9: the sous in case the balloon goes up.
27:54
Speaker 11: On the south.
27:54
Speaker 1: Okay, doctor Cohen, thank you so much for joining us.
27:57
Speaker 1: I appreciate your thoughts in your analysis, Doctor Eryl. He's
28:00
Speaker 1: the senior fellow at the Atlanta Council Eurasia Center, also
28:04
Speaker 1: a former member of the Council Foreign Relations, one of
28:08
Speaker 1: the leading voices. Their intentions obviously running extraordinarily high. The
28:11
Speaker 1: next several days, I guess we'll show a lot show
28:15
Speaker 1: the world where this thing may develop over the coming days, weeks,
28:18
Speaker 1: and months, and we'll certainly have the full reporting.
28:21
Speaker 4: You're listening to the Team ken'shur Live program Bloomberg Markets
28:25
Speaker 4: weekdays at ten am Eastern on Bloomberg dot Com, the
28:28
Speaker 4: iHeartRadio app and the Bloomberg Business App, or listen on
28:32
Speaker 4: demand wherever you get your podcasts.
28:35
Speaker 1: Matt Miller, Paul Sweeney live here in our Bloomberg Interactive
28:38
Speaker 1: Brokers studio, streaming as well on YouTube. So check us
28:41
Speaker 1: out over there. Let's bring in our good friend Mike mcglohan.
28:43
Speaker 1: He's the senior macro strategist for Bloomberg Intelligence. He's based
28:47
Speaker 1: down in our Miami office. And Mike, we see oil
28:50
Speaker 1: surging here, no surprise, WTI up over four percent. We're
28:53
Speaker 1: now about eighty six dollars a barrel here. Historically, you've
28:57
Speaker 1: got a ton of experience in this mic. When you see,
29:00
Speaker 1: you know, geopolitical conflicts breakout, particularly in the Middle East.
29:04
Speaker 1: How do traders in the oil pits, how do they
29:06
Speaker 1: kind of parse this stuff out?
29:09
Speaker 12: The quote my son's or adults like yours, they would teach
29:13
Speaker 12: me the worm meh, the word meth. From what you'd
29:16
Speaker 12: see in crude oil today of four percent, it's kind
29:18
Speaker 12: of a normal day for crude oil. I'm not saying
29:20
Speaker 12: what happened with the how messiresrail conflict isn't normal, but
29:24
Speaker 12: it's it's indicative of what's happening in crude oil. Cruel
29:27
Speaker 12: peak at the end of September around ninety five oh
29:29
Speaker 12: three so far, that's the high for the year. I
29:32
Speaker 12: think it's the market's retesting that, but it's also showing
29:35
Speaker 12: the resilience of manage money net positions are just starting
29:39
Speaker 12: to roll over their way too long.
29:40
Speaker 8: It looks like it's probably peaked.
29:41
Speaker 12: It's showing the more significant tilt globally towards this event
29:46
Speaker 12: might accelerate that tilt towards recession. And one thing also
29:50
Speaker 12: you're seeing what it's doing is you look at the
29:51
Speaker 12: front the back month futures. In terms of Fed Fund futures,
29:55
Speaker 12: I mean Fed Fund future is just for October of
29:57
Speaker 12: next year, down fifteen basis points. That implies that to you,
30:01
Speaker 12: not yield when we see it open up tonight will
30:02
Speaker 12: be down ten or so basis points. So to me,
30:05
Speaker 12: this might mark the peak that I've been looking for
30:07
Speaker 12: in crude oil and for bond yields, and to sustain
30:11
Speaker 12: higher prices, you need a major cutback and supply maybe
30:15
Speaker 12: from Iran, but there are only a million barrels a day.
30:16
Speaker 12: To put that in context, the excess of supply over
30:20
Speaker 12: demand in the US and Canada is six million barrel's
30:23
Speaker 12: day about.
30:24
Speaker 2: I just don't understand why we don't rally to far
30:29
Speaker 2: higher prices. I mean, my last week we saw barrels
30:34
Speaker 2: of WTI trade for ninety five dollars. That was well
30:38
Speaker 2: September twenty eighth, Right, If you liked it at ninety five,
30:44
Speaker 2: then it's now, you know, trading at eighty six while
30:51
Speaker 2: we're looking at the worst geopolitical eruption in Israel in
30:55
Speaker 2: fifty years. Why why wouldn't you back up the truck
30:59
Speaker 2: at this.
31:00
Speaker 8: Level it was already backed up. That's a key point.
31:02
Speaker 12: And member man positions of hedge funds, they were the
31:06
Speaker 12: most long at that period since November of last year,
31:10
Speaker 12: when CRUILL peaked around ninety three, now peaked around ninety five.
31:13
Speaker 12: But it's also that macro economic bent match, and it's
31:17
Speaker 12: that tilt towards recession. Remember it's this is a major
31:20
Speaker 12: difference when we were young in the seventies and we
31:22
Speaker 12: had these kind of issues. The US is a net
31:24
Speaker 12: exporter and a massive surplus kicking in.
31:28
Speaker 8: So also remember what happened two two thousand and eight.
31:30
Speaker 12: CRUIL peaked at one forty seven dollars a barrel, and
31:33
Speaker 12: it was a lot of that was positions. It wasn't
31:35
Speaker 12: really a strong fundamental reason. And when that tilts down,
31:39
Speaker 12: which it is or in the middle of that, then
31:40
Speaker 12: you have the major repercussions of going towards recession. And
31:44
Speaker 12: I think that's the case. Is so to me, that
31:46
Speaker 12: peak at ninety five was probably synonymous with bond yields
31:49
Speaker 12: peaking around five percent.
31:51
Speaker 2: Just a little history lesson right of what happened during
31:54
Speaker 2: the yam Kapur War, because well, I was born like
31:57
Speaker 2: a month later in nineteen seventy three, but I remember
32:00
Speaker 2: distinctly a few years later on my aunt, who had
32:02
Speaker 2: had a Mustang, got a little Honda Accord because you
32:06
Speaker 2: know exactly the oil, the oil what was it like
32:11
Speaker 2: in the oil embargo as it was referred to, sort
32:14
Speaker 2: of started with with that war, right.
32:18
Speaker 12: Yeah, so air oil bargues I love going back to
32:20
Speaker 12: nineteen seventy three seventy four, that's the first time crudell
32:23
Speaker 12: kind of really got to near twenty and that started
32:27
Speaker 12: a trend in crudell being the worst performing commodity a
32:30
Speaker 12: bar none even compare it to copper and soybeans and
32:32
Speaker 12: broad commodities.
32:33
Speaker 8: I love publishing on this. It just doesn't go up.
32:36
Speaker 8: It does and it.
32:37
Speaker 12: Spikes, it makes it go down. It's its own worst
32:39
Speaker 12: enemy versus things like copper. At least it made a
32:42
Speaker 12: new high last year. It's backed up. And if you
32:44
Speaker 12: compare it to soybeans, which I published this morning, soybeans
32:46
Speaker 12: way outperformed Crudel over time. So that to me is
32:49
Speaker 12: one that's changed the world and for people like me
32:52
Speaker 12: in the seventies. When I was pumping gas in nineteen
32:54
Speaker 12: seventy nine, we had a price in half gallons because
32:57
Speaker 12: it went over a dollar a gallon. The world's changed
32:59
Speaker 12: and that's what's really happened, and that's happening now and
33:01
Speaker 12: it's showing up every day in this commodity that is
33:04
Speaker 12: right now. The same price is first traded in two
33:06
Speaker 12: thousand and seven. And that's why I like to look
33:10
Speaker 12: at it as if we were a month ago when
33:12
Speaker 12: this happened.
33:13
Speaker 8: That was Kruel's an upswing.
33:14
Speaker 12: It might have pumped up ten dollars, but sorready started
33:16
Speaker 12: tilting back down for the global recession, which most people
33:20
Speaker 12: know that's coming, particularly if you look at leading indicators
33:22
Speaker 12: and economics, and after this conflict will trigger that Cruel
33:26
Speaker 12: will probably go to forty dollars bills. I've been saying
33:29
Speaker 12: that for a long time. I've been early, I've been wrong.
33:32
Speaker 12: But now that I see what's happening, it's its own
33:34
Speaker 12: worst enemies. It's spiking again. And you see what's happening.
33:38
Speaker 12: The stock market goes down. And if this tilts a
33:40
Speaker 12: normal correction in the stock market, that's the number one
33:42
Speaker 12: pressure for Crudel the last few years. Every time stock
33:45
Speaker 12: market drops twenty percent and it Fed saves it, Crueil
33:48
Speaker 12: drops forty percent.
33:49
Speaker 8: But this time will the FED save it?
33:51
Speaker 1: So, Mike, you know, I, as Matt mentioned, you know,
33:53
Speaker 1: oil peak just you know, back in the late September.
33:55
Speaker 1: But since then it's it's been coming back. When we
33:57
Speaker 1: were down, you know, obviously down in the low eighties
34:00
Speaker 1: for the weekend news here, and was that as you're
34:03
Speaker 1: suggesting kind of pricing in a recession.
34:06
Speaker 8: Oh, sure, it's starting a tilt there.
34:07
Speaker 12: So the low for the year w WTR Crudell sixty
34:11
Speaker 12: three dollars and sixty four cents. Now, if you had
34:14
Speaker 12: told anybody that a year ago, they would have said no,
34:16
Speaker 12: you couidding even be one in front of that, A
34:18
Speaker 12: one handle might know. So I have to point out
34:20
Speaker 12: there's a few things I did get right, and that
34:22
Speaker 12: is you never want to buy it when it spikes
34:23
Speaker 12: at that velocity. And every single time we spike it
34:26
Speaker 12: a symemal velocity of last year, you always have a recession.
34:29
Speaker 12: Now we're still a FED tightening. So yes, it's bounced
34:32
Speaker 12: from the low. Was low was eighty one dollars and
34:35
Speaker 12: fifty cents. But the average price for this year, about
34:38
Speaker 12: seventy seven dollars, is the same as about two thousand
34:40
Speaker 12: and six. At least gold has made a new high.
34:42
Speaker 12: So I look at this way. Crudeau might have peaked
34:45
Speaker 12: around ninety five. It looks like gold might be putting
34:47
Speaker 12: the bottom around eighteen hundred. Remember, we'll see what's happening
34:49
Speaker 12: with this conflict. It's making the world realize. Okay, Well,
34:52
Speaker 12: the dollar is the best place to be, particularly with
34:55
Speaker 12: the high yields. And if you get a recession, Crudel
34:58
Speaker 12: almost always gets cheap. It almost has to get cheap
35:00
Speaker 12: to reset itself. That's what's been missing so far this year.
35:03
Speaker 1: So in a geopolitical in a world where we've got Ukraine,
35:07
Speaker 1: the Middle East. Is there anything else on the commodity
35:09
Speaker 1: infrastructure that you're suggest people either get long or short.
35:14
Speaker 8: Well, the best foreign commodity this year is orange juice.
35:17
Speaker 12: It's one twentieth the amount of trading as wheat, and
35:23
Speaker 12: that's just more of an inventory thing. But the key
35:25
Speaker 12: thing I look at overall looking forward is let's look
35:27
Speaker 12: at historically, the best performing commodity almost all of history
35:31
Speaker 12: is gold. And except in demand pull periods when you
35:34
Speaker 12: pull up things like gold and copper, but particular in recessions,
35:37
Speaker 12: gold is the best performer. And I think it's just
35:39
Speaker 12: a matter of time it kicks in and does what
35:41
Speaker 12: it almost has does. Remember remember thinking about gold, you
35:44
Speaker 12: can store it on your body. It's cheap, it's not expensive.
35:46
Speaker 12: Crudles a toxic chemical, it's very expensive to store. That
35:49
Speaker 12: will show up over time. So if you invested interested
35:52
Speaker 12: in energy crudel, it's better to invest in the equities.
35:56
Speaker 12: Yet if you invest it, and you can still invest
35:58
Speaker 12: in physical gold and ETF and I think I think
36:00
Speaker 12: that's still gonna be one of the best form of
36:01
Speaker 12: commodities this year. Now this year it's app only about
36:04
Speaker 12: two percent. It was up almost ten and I think
36:06
Speaker 12: it's just came back to good support, and if we
36:08
Speaker 12: get toward the recession, I think it's gonna kind of
36:10
Speaker 12: meet at the same price as wherever they meet with
36:12
Speaker 12: the S and P five hundred.
36:13
Speaker 2: By the way, you rather have the ETF than just
36:15
Speaker 2: actually buying gold bars like a New Jersey senator and
36:19
Speaker 2: putting them under your bed.
36:21
Speaker 12: Yeah, I've enjoyed beating the gold space and if that
36:26
Speaker 12: was me, it'd probably be lost or stolen. I know
36:28
Speaker 12: my grandmother who was born in Germany during the war,
36:31
Speaker 12: they still store some gold in their in their underwear drawer,
36:36
Speaker 12: like okay, but I mean there's always it's diversity. The
36:39
Speaker 12: thing about ETFs is you can buy, hold and store
36:41
Speaker 12: that metal for virtually nothing. Compared to history, it was
36:44
Speaker 12: very difficult to do and you still have to pay
36:46
Speaker 12: for the storage and you have the risk.
36:48
Speaker 8: ETFs.
36:49
Speaker 12: I'm not saying they're risk free, but there's so much
36:50
Speaker 12: easier to get exposure. And the key thing that's really
36:53
Speaker 12: push for gold this year is that high interest rate
36:55
Speaker 12: you can be you know, the the output for the
36:57
Speaker 12: two you know that giant sucking sound of being up
37:00
Speaker 12: up of about five percent might have peaked with the
37:03
Speaker 12: FED potentially pivoting at some point, and that means gold
37:06
Speaker 12: will gains a little bit of accolades because it's that
37:09
Speaker 12: it doesn't earn interest, and it's that that the man
37:12
Speaker 12: pulling else to the stock market. If the stock marker's peak,
37:14
Speaker 12: gold should be one of the best performed.
37:15
Speaker 2: It sounds like bitcoin, only not nearly as good, right,
37:18
Speaker 2: because well, you can keep bitcoin on your person too,
37:21
Speaker 2: and a lot more of it.
37:22
Speaker 8: Big difference with bitcoin.
37:24
Speaker 12: It's the best performing asset in history, and it's volatility's
37:27
Speaker 12: about two to three times a gold and Matt, we
37:29
Speaker 12: all know what happens in recessions when people hit the
37:31
Speaker 12: bit and things. You sell your winners and you sell
37:34
Speaker 12: the high volatility assets first. And that's what I'm still
37:36
Speaker 12: worried about bitcoin. And if we have a normal recession,
37:38
Speaker 12: Bitcoin's going to go down with risk assets. At some
37:41
Speaker 12: point we might get to another bridge and lack more
37:42
Speaker 12: like gold and long bunds. But today you see what's
37:45
Speaker 12: happening on compared to compared to Monday of Friday, it's
37:49
Speaker 12: down about two percent. Ethereum is down about four percent,
37:52
Speaker 12: and I expect that to continue if we have a
37:54
Speaker 12: normal recession.
37:55
Speaker 1: All right, Mike, thanks so much for joining us. As always,
37:57
Speaker 1: Mike mcloanh directing to the point on his call. There,
38:01
Speaker 1: Mike McLoone, senior macro strategist, Bloomberg Intelligence from our Miami
38:05
Speaker 1: Beach office.
38:07
Speaker 4: You're listening to the tape cansur live program Bloomberg Markets
38:11
Speaker 4: weekdays at ten am Eastern on Bloomberg Radio, the tune
38:14
Speaker 4: in app, Bloomberg dot Com, and the.
38:16
Speaker 5: Bloomberg Business App.
38:17
Speaker 4: You can also listen live on Amazon Alexa from our
38:20
Speaker 4: flagship New York station. Just say Alexa playing Bloomberg eleven thirty.
38:26
Speaker 1: I'll tell you what. Whenever there is a major geopolitical
38:29
Speaker 1: issue anywhere in the globe, one of the first people
38:32
Speaker 1: we go to is Jack Divine. He's a president and
38:35
Speaker 1: founding partner of the.
38:36
Speaker 5: Arc And Group.
38:37
Speaker 1: He is a thirty two year veteran of the Central
38:40
Speaker 1: Intelligence Agency. He has been stationed all over the world.
38:44
Speaker 1: He's a publisher of the book Good Hunting and American
38:46
Speaker 1: Spymaster Story, which I highly recommend was excellent read. Jack. Here,
38:51
Speaker 1: we are back in the Middle East again with more
38:54
Speaker 1: conflict here. Let me just start with the intelligence area here.
38:59
Speaker 1: What happened been that the vaunted Israeli intelligence, the American
39:04
Speaker 1: intelligence did not pick this up.
39:07
Speaker 11: Well, I think everybody scratching their head. I think everyone
39:10
Speaker 11: recognizes it for a failure. When you look at israel
39:15
Speaker 11: I mean, I've worked closely with them over the years.
39:17
Speaker 11: They're very talented, they were at the cutting edge of technology.
39:22
Speaker 11: They know their target right, they know the threat, They've
39:25
Speaker 11: applied a lot of the fine technology. So we have
39:28
Speaker 11: to ask ourselves today how did Hamas get past that?
39:34
Speaker 11: And then the second area is the human sources. And
39:39
Speaker 11: again I think many of us probably were relying on
39:44
Speaker 11: the Israelis to have Hamas covered in a way that
39:48
Speaker 11: somehow it would have been an early warning. It's the
39:51
Speaker 11: early warning that you miss. Parts of intelligence are not unusual,
39:58
Speaker 11: but they miss that early warning something pretty good like this.
40:01
Speaker 11: There has to be an examination of conscience by all
40:04
Speaker 11: intelligence service that asks or do we have the right
40:07
Speaker 11: balance between technology and human and are we applying the
40:10
Speaker 11: right way? And what countermatters are we dealing with. So
40:14
Speaker 11: I think it's a tragic situation and an intelligence failure
40:18
Speaker 11: that lawrance after action, very careful analysis.
40:23
Speaker 2: What do you think Hamas? And maybe if it's working
40:27
Speaker 2: with HASBLA or others. What's ultimately their goal here, because
40:31
Speaker 2: now they've broken through borders at multiple points in Israel
40:36
Speaker 2: and carried out horrific terrorist attacks.
40:42
Speaker 8: Was that it?
40:43
Speaker 2: Or do you think there's there's there's more to come.
40:47
Speaker 2: Are they trying to bait you know, Israel into Gaza,
40:51
Speaker 2: Are they trying to blow up this conflict even further?
40:55
Speaker 2: Or do you think that was you know, this was
40:57
Speaker 2: the plan and it was accomplished.
40:59
Speaker 11: I think there's a lot of complex geopolitical issues behind it.
41:04
Speaker 11: Whether the organizers of it took all of them into
41:08
Speaker 11: consideration and played a great chess game remains to be seen.
41:12
Speaker 11: I'm allowing that it's possible. What I think what we're
41:16
Speaker 11: seeing is what there was. Other words, they decided that
41:20
Speaker 11: at a certain point they were going to attack. This
41:24
Speaker 11: has been long in coming. I think they needed it
41:27
Speaker 11: to sustain themselves and to push back. The thing that
41:33
Speaker 11: is stunning about it is that this is totally different
41:36
Speaker 11: in the level of sophistication and coordination, and I believe
41:40
Speaker 11: they had help. I mean, it's hard for me today.
41:43
Speaker 11: I may be proven wrong, but this looks like help
41:46
Speaker 11: from people that have done complicated operations, and specifically the Iranians.
41:52
Speaker 11: So the Iranians have one set of things at play,
41:56
Speaker 11: you know, Mas has some the Russians were right in
42:00
Speaker 11: approving it, and they have things to play. There's the
42:04
Speaker 11: Sauti Israeli prospects of the peace agreement, establishing relationships, if
42:09
Speaker 11: you will. So there's a lot of play. But I
42:12
Speaker 11: think Hamask just wanted to have a successful operation. This
42:17
Speaker 11: may exceed their expectations, but I think they weren't. They
42:21
Speaker 11: weren't doing it on the fly. They executed their plan
42:24
Speaker 11: and I think we saw it after that. I think
42:27
Speaker 11: it's the Israelis that have the game. They will they
42:30
Speaker 11: will decide how this plays out. I mean, him all
42:34
Speaker 11: women forced that they could flatten the country if they
42:36
Speaker 11: wanted to, So they have to calibrate it. But I
42:39
Speaker 11: think that Hamas can come back with new tricks. I
42:42
Speaker 11: think they pretty well run the course. Can his ballage
42:46
Speaker 11: jump in? Can there be problems in the West Bank?
42:49
Speaker 11: All that remains to be seen. But I don't think
42:51
Speaker 11: it's any in anyone's handbook. This part they're playing. I
42:55
Speaker 11: think they're planning day by day.
42:57
Speaker 1: Jack, you bring up some bigger issues as it relates
43:00
Speaker 1: to Iran, maybe even Russia. You know, I guess that
43:05
Speaker 1: the issue is that ties in with Ukraine. I mean,
43:10
Speaker 1: what role do you think the United States should play
43:13
Speaker 1: in the coming days and weeks now.
43:16
Speaker 11: I've been talking about it for some time. I think
43:19
Speaker 11: there's a grand struggle that is taking place in front
43:23
Speaker 11: of us in terms of the balance of power. On
43:27
Speaker 11: the one side, you have the democratic forces and its allies,
43:30
Speaker 11: and the other you have the non democratic forces on
43:33
Speaker 11: the other There is a big game that's being played
43:36
Speaker 11: well beyond Ukraine. Ukraine was clearly the first manifestation of it,
43:40
Speaker 11: but you have Russia, China, Iran, North Korea. But now
43:45
Speaker 11: they're extending it and trying to spread spread the faith
43:49
Speaker 11: of the Gospel if you like the other countries. If
43:51
Speaker 11: you look at Latin America, there's turmoil there in terms
43:54
Speaker 11: of elections, and in Africa, tremendous turmoil. It's very reminiscent.
44:01
Speaker 11: I hate to say it because, well, you're a Cold warrior,
44:03
Speaker 11: but it's so reminiscent of the international dimension of the
44:07
Speaker 11: Cold War, where the West and its allies were fighting
44:11
Speaker 11: them and counterpunching everywhere. Every once there to be a
44:14
Speaker 11: hot war so I think we're looking at it, and
44:16
Speaker 11: we have to look at a bigger scale. This is
44:19
Speaker 11: not just a fight between Hamas and Israel. There is
44:24
Speaker 11: this like Ukraine is going to alder the geopolitical dynamic
44:30
Speaker 11: of the balance of power, and now we're in the
44:33
Speaker 11: big time where things can get misunderstood, misconstrued and we
44:39
Speaker 11: end up expanding hot wars.
44:43
Speaker 2: Are you concerned about the impact the impact of this,
44:47
Speaker 2: I don't know if if you're saying this is kind
44:49
Speaker 2: of an axis of evil here the Russians, the Chinese,
44:54
Speaker 2: the Iranians, and North Korea, but certainly a lot of
44:57
Speaker 2: those countries have been aim for misinformation. And US elections
45:02
Speaker 2: were approaching one and you know, you've got a radical
45:08
Speaker 2: contingent in Congress that seems to, if not support Putin,
45:12
Speaker 2: at least be opposed to Ukrainian aid. Are are you
45:14
Speaker 2: worried that they've sort of infected the US Congress.
45:19
Speaker 11: We're in a new age where artificial intelligence disinformation is
45:26
Speaker 11: part of the realm, as part of the big game,
45:29
Speaker 11: if you will, and the Russians have been using them
45:32
Speaker 11: for some time. I think there was a general slowness
45:35
Speaker 11: in recognizing the breadth of it. Including involvement in our elections,
45:41
Speaker 11: which was I was more upset about the fact that
45:45
Speaker 11: they were involved in not that they were collecting information,
45:49
Speaker 11: but that they were playing in internal US affairs. Is
45:52
Speaker 11: really quite unprecedented. I mean, there's a little dabbling here
45:55
Speaker 11: and here in history, and the same is true on
45:57
Speaker 11: our site. We do not meddle inside their country. This dynamics,
46:00
Speaker 11: so this information and I would just bring it to
46:03
Speaker 11: the moment. This information is very much part of the
46:08
Speaker 11: Hamas if you like, and its allies propaganda. The propaganda
46:11
Speaker 11: is out there mobilizing their friends, and it's dynamic. I
46:16
Speaker 11: also should have put a footnote the cyber attacks at
46:19
Speaker 11: the very beginning of the Hamas attack are very impressive.
46:24
Speaker 11: So you're looking at that new dimension of war, just
46:27
Speaker 11: like you're looking at new dimensions of war in Ukraine.
46:31
Speaker 11: This experience will not only be lessons learned for intelligence officers,
46:36
Speaker 11: but it's also going to be lessons like lessons learned
46:41
Speaker 11: on war fighting and how we are going to deal
46:44
Speaker 11: with this, and it won't be just in the Middle East.
46:49
Speaker 11: So I think hold on to your seat.
46:53
Speaker 1: Jack, thirty seconds left. What do you think is Israel
46:56
Speaker 1: does next? How do you think they react.
47:02
Speaker 11: I think they have no choice but to use an
47:06
Speaker 11: iron hand, and with that will come, you know, repercussions.
47:11
Speaker 11: I don't see how it's possible feasible that had a
47:18
Speaker 11: soft landing negotiators. I think it's nonsense to suggests that
47:22
Speaker 11: at this point, when you look at the savagery of it,
47:26
Speaker 11: How of the Israelis that have suffered so much in history,
47:30
Speaker 11: how does the government stay in power and not set
47:34
Speaker 11: this right? So I think the repercussions are going to
47:38
Speaker 11: be very hard. I take that word everybody better. It'll
47:43
Speaker 11: be hard landing with long term implication. Getting back to
47:49
Speaker 11: the peace DAGs.
47:49
Speaker 1: Actually, Jack, I'm sorry, I just got to leave it
47:52
Speaker 1: there just because of time, But thanks as always, Jack Divine, President,
47:55
Speaker 1: founding partner of the ARC and Group.
47:57
Speaker 5: You're listening to the tape.
47:58
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48:02
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48:05
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48:07
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48:15
Speaker 1: Let's go to our next guest right here to get
48:17
Speaker 1: a sense of kind of a broader view of these
48:19
Speaker 1: markets here in the context of what is just another
48:22
Speaker 1: piece in the wall here in terms of geopolitical issues.
48:25
Speaker 1: Quincy Crosby joins us. She is the chief of Global
48:28
Speaker 1: Strategist for LPL Financial. Quincy, thanks so much for joining
48:33
Speaker 1: us here. Based upon your experience when you wake up
48:37
Speaker 1: to find an event like this, what's happening in Israel
48:40
Speaker 1: or what's happening in Ukraine and other parts of the world,
48:43
Speaker 1: in your experience, how do you kind of view markets
48:47
Speaker 1: in this how do you view positioning? Is it let's
48:49
Speaker 1: just kind of not you know, make quick changes, or
48:53
Speaker 1: how do you typically react?
48:55
Speaker 13: Well, you know, very often the first response in a
48:59
Speaker 13: mar is sell first, ask questions later. We didn't see
49:04
Speaker 13: that in this market. It's actually been maybe because it
49:07
Speaker 13: was the weekend, the market had time to assimilate what
49:10
Speaker 13: was going on. But you don't want to do anything
49:13
Speaker 13: drastic because there's still uncertainty hovering over the market. Now
49:18
Speaker 13: you would want to go into treasuries, obviously gold. You
49:22
Speaker 13: see that the treasure market will open, and you want
49:25
Speaker 13: to see the stocks that you want to buy may
49:29
Speaker 13: wind up being even more attractive than even in this
49:33
Speaker 13: death by a thousand cuts that we've had in the
49:36
Speaker 13: market over the last number of sessions. So again you
49:39
Speaker 13: don't want to be but I will say this, we're
49:42
Speaker 13: paying attention to energy, crude oil is hyper hyper alert
49:48
Speaker 13: to any rumor, any chatter of whether or not this
49:52
Speaker 13: conflict will expand into the deeper Middle East and or
49:56
Speaker 13: producing region. And also defense stocks. There is no doubt
50:01
Speaker 13: about it that we need more defense spending, and I
50:05
Speaker 13: think it's going to happen because of this in Ukraine.
50:08
Speaker 2: Obviously you have to imagine it will expand given what
50:12
Speaker 2: we've heard from Netan Yahoo and also given his position there.
50:19
Speaker 2: I wonder what you think about treasuries now. The market
50:21
Speaker 2: is closed today for the bond market is closed today
50:24
Speaker 2: for Columbus Day. But we have yields hovering at very
50:28
Speaker 2: high levels. So for example, the ten year right now
50:31
Speaker 2: at four eighty, the twenty year at five sixteen, five seventeen,
50:36
Speaker 2: and the thirty year at almost five percent. You know,
50:40
Speaker 2: typically this is a place at Quincy where you see
50:43
Speaker 2: investors go for safe haven and right now would be
50:48
Speaker 2: a time when they would use that, do they?
50:51
Speaker 5: You know?
50:51
Speaker 2: When the market opens, buy up these treasuries and force
50:54
Speaker 2: those yields back down.
50:56
Speaker 3: I think you'll probably see that.
50:58
Speaker 13: It won't just be.
51:00
Speaker 7: Investors.
51:00
Speaker 13: I think it's going to be global if the situation
51:04
Speaker 13: remains the same, or certainly if it looks as if
51:08
Speaker 13: there's going to be an escalation in terms of what
51:13
Speaker 13: Israel intends to do.
51:17
Speaker 1: So Quincy. I mean, I guess one of the questions
51:19
Speaker 1: here for in investors is is this kind of the
51:22
Speaker 1: new normal? I guess, I mean, do I need to
51:24
Speaker 1: have my portfolio structure in such a way that, you know,
51:29
Speaker 1: it just seems to be more and more uncertainly out there.
51:32
Speaker 1: From a geald political perspective, do you view it that way?
51:36
Speaker 1: Or is this kind of we shouldn't go that far?
51:39
Speaker 13: I guess I don't think we should go that far.
51:42
Speaker 13: I mean, let me say that if the European Union,
51:46
Speaker 13: the US, China for example, can contain this event to
51:52
Speaker 13: just the region, it will be it will be significant
51:58
Speaker 13: for the concept of g A political cooperation. Nobody wants
52:03
Speaker 13: to see this expand maybe has blocked does Humasque, but overall, uh,
52:08
Speaker 13: there's a broad consensus that this can't go beyond these borders.
52:13
Speaker 13: So that would be good that would be positive. But overall,
52:17
Speaker 13: you know, we have to look in Washington as to
52:20
Speaker 13: whether or not Washington can come together come up with
52:24
Speaker 13: a concrete package for defense, not just for the Israeli
52:29
Speaker 13: side and Ukraine, but for the United States. We're short
52:34
Speaker 13: in terms of defense spending. It's down, and we don't
52:39
Speaker 13: have the stock calls that we need. It must be done.
52:42
Speaker 13: Maybe this will be the impetus for it. There's nothing
52:45
Speaker 13: better than strength. There's nothing better than a government that
52:49
Speaker 13: is intact that actually helps prevent this kind of event.
52:55
Speaker 1: So it would help a Speaker of the House maybe
52:57
Speaker 1: the first step.
52:59
Speaker 2: Paul pointing out that we don't even have a Speaker
53:01
Speaker 2: of the House here. And part of the problem was
53:04
Speaker 2: obviously that the far right didn't want to fund any
53:09
Speaker 2: more support for Ukraine. And you have to wonder, I
53:12
Speaker 2: guess Israel is a different story, especially for the far right.
53:15
Speaker 2: But does the political situation in the US concern you
53:19
Speaker 2: at all? Quincy?
53:22
Speaker 8: Oh?
53:22
Speaker 7: Yes it does.
53:24
Speaker 13: Again, if I were, let's say, you know, I wanted
53:28
Speaker 13: to do something militarily overseas, this would be a good
53:33
Speaker 13: time because just the way Hamas looked at what was
53:36
Speaker 13: going on in Israel and the strikes and so on.
53:40
Speaker 13: It's always a good time when a government seems as
53:44
Speaker 13: though it is not integrated properly. And you're right about
53:50
Speaker 13: the conservative element in terms of spending more defense for Israel.
53:56
Speaker 13: Very strong evangelical Christian base that is very pro Israel
54:00
Speaker 13: and has been historically all right.
54:04
Speaker 1: So Quincy, let's step back. Earnings are starting off in ernest.
54:09
Speaker 1: Later this week, we'll get the banks here. What are
54:12
Speaker 1: you looking for in this earnings cycle?
54:16
Speaker 13: This is crucial and I'm glad that we start officially
54:19
Speaker 13: with the banks, especially JP Morgan. I want to hear
54:22
Speaker 13: what they have to say about the consumer credit card delinquencies,
54:28
Speaker 13: late payments, whether and who's being affected the most. I
54:32
Speaker 13: think we know that it is lower wage journals, but
54:35
Speaker 13: we want to hear from them rather than this conjecture,
54:38
Speaker 13: than the headlines that we see every day. They will
54:41
Speaker 13: have a good handle on it. Also, they're going to
54:43
Speaker 13: tell us about loan growth from their customers, from their
54:47
Speaker 13: client base overall, not just credit cards, and the guidance
54:51
Speaker 13: that the companies have. This is crucial because one of
54:54
Speaker 13: the things that is concerning and has been for some time,
54:58
Speaker 13: but it's been holding up, is margin compression, because if
55:02
Speaker 13: we see margin compression deepening, and we don't think it's
55:06
Speaker 13: going to be, but if we do, they're going to
55:08
Speaker 13: have to cut costs and that is going to affect
55:11
Speaker 13: the labor market, which is actually held up as we
55:14
Speaker 13: know and indicates resilience. But any sense that companies need
55:20
Speaker 13: to cut costs in order to get that bottom line,
55:23
Speaker 13: it is going to hit the labor market, which will
55:25
Speaker 13: hit the consumers. And then that leads you to the
55:28
Speaker 13: worry over a darker landing as opposed to a softer landing.
55:34
Speaker 13: We don't expect it, but we're watching for.
55:37
Speaker 1: It absolutely, all right, Quincy, thank you so much for
55:39
Speaker 1: joining us. I always appreciate getting your perspective. Quincy Crosby.
55:43
Speaker 1: She is the chief Global strategist at LPL Financial. Again,
55:48
Speaker 1: geopolitical risks front and center here. Central bank policy also
55:53
Speaker 1: a big issue for these markets. And then starting really
55:56
Speaker 1: later this week, particularly on Friday, with the big banks,
55:58
Speaker 1: we're going to start getting into the earning season.
56:02
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
56:06
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56:09
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56:13
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56:16
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56:18
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56:21
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