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- [00:01]
Nathan Hager
The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business.
- [00:29]
Paul Sweeney
IBM when you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering and claims experience. Learn more@the Hartford.com riskmitigation policies provided by Hartford Fire Insurance Company and its property and casualty affiliates.
- [01:09]
Barbara Doran
Hartford, Connecticut as industries evolve faster than ever, companies need an environment that accelerates strategic growth and Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most a resilient, innovative ecosystem, diverse communities that attract top talent, and a quality of life that supports work life. Balance with our unified team Michigan approach, businesses scale faster and compete at the highest level. Michigan Pure Opportunity Seize your opportunity@MichiganBusiness.org Bloomberg Audio Studios podcasts Radio News. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [02:08]
Tom Keene
Julian Emanuel with us with Evercore ISI right now. I love this phrase end game elements. What's an end game element?
- [02:16]
Julian Emanuel
And then, well first of all the end game is to thank you to start out for after a month plus of World cup you have refocused the country on the sports rivalry of all time. The one that really matters. Yankees, Red Sox. That's the end game of the World Cup.
- [02:36]
Tom Keene
Joy last night to listen to. I think we are in Boston.
- [02:41]
Paul Sweeney
Yep, yep.
- [02:41]
Tom Keene
Will in the team and nobody was pulling a jersey. Nobody was stepping on somebody's ankle. You know they have their moments. But it was great. Continue here. What's an endgame element?
- [02:53]
Julian Emanuel
So the question is, is that in this environment where we know that AI is dominating as an investment theme, where we know we're on course for political change in the fall, where we know that earnings have Been unprecedented strong is there? How does the end game develop? And a lot of the questions that we've been fielding is does this have to end like it ended in Y2K? And our answer is decidedly it doesn't because earnings are good. And oh, by the way you look at this year, value is outperforming growth, the stock market is very strong and the economy is solid.
- [03:40]
Paul Sweeney
So Julian, we're getting into the teeth here of the second quarter earnings. First quarter earnings were just extraordinary across the S&P 500 bar. Pretty high for the second quarter as well. How do you feel about earnings?
- [03:52]
Julian Emanuel
It's going to be great. Again, okay, we know that. Which is why essentially as the season has started, you've had mixed reactions to earnings reports and that's actually been a feature of the majority of this bull market. But ultimately for us, what we think investors will likely do is refocus on the stocks and the areas that have been sort of laggards and that are going to report great earnings. And oh, by the way, that's large cap tech.
- [04:25]
Paul Sweeney
Large cap tech. So where in large cap tech, I mean Tom and I, we talk about the softer stocks all the time, like A Microsoft down 20%. You just, you rarely see that type of performance over any meaningful period of time. How about some of these software names?
- [04:39]
Julian Emanuel
Well, software is going to be pick and choose. Okay, okay. But, but broadly, you know, when you think about the Mag 7, they have been punished already for what we're going to find out this, this reporting period that free cash flow because of the AI buildout is likely to cross below the zero line. Stocks have discounted it.
- [05:04]
Tom Keene
I just want everybody worldwide to know that all three of us have what I call air conditioned throat, which is in the summer. And you were said this, this room is very cool because of all the electronic equipment and that. And then you go home where Ms. Has it an iceberg and then you get the Uber where it's, you know, can be hit or miss iceberg. And none of us can speak this morning so in advance apologize. I'm looking at Amazon. Paul Sweeney taught me how to do this. You can see on page two of the screen the description screen. Yeah, Tom Secunda taught me how to use the screen. The institutional ownership Evercore nails this. Are they under Owned? Are the Mag 7? You know, when you look at percentages of index funds and all that, are they under owned by the long only buy side?
- [05:50]
Julian Emanuel
They are, there's no question about it. And not only are they under owned by the long only buying buy side. They also have been reasonably active shorts from the hedge funds. And we all know that it's very frequently the case. Certainly it was the case at the beginning of April that the most vigorous rallies start with short covering. And we think we're going to see that this earnings season.
- [06:15]
Paul Sweeney
What are we going to see from the Federal Reserve? We've heard Mr. Warsh a couple of times now in public. Inflation is quote unquote intolerable from his perspective. So it seems like the focus is on inflation. What do you guys expect from the Fed?
- [06:27]
Julian Emanuel
So we don't think you're going to get anything next week. But the problem for Warsh is twofold. Number one, the escalation with Iran has sent oil to a level that's now
- [06:43]
Tom Keene
over 90 a barrel. Brent crude.
- [06:45]
Julian Emanuel
Right, exactly. And then you mentioned it at the top of the hour. The 10 year yield is getting to an uncomfortable place and it looks to us like, you know, actually the US has been best behaved. But it looks like you're on the verge of another global breakout, higher in long term yields. And that's a problem across America.
- [07:08]
Tom Keene
This morning. Julian Emanuel joins us. Evercore isi, thank you for listening the way you choose to listen to us on YouTube, building, growing each and every day, humbled by the length of listening on YouTube. What Colin of the twins told me, people have it on their phone. They're listening to YouTube while they're driving and they turn the phone over so they can't peek and they just listen to my lousy voice.
- [07:33]
Paul Sweeney
Perfect.
- [07:34]
Barbara Doran
Perfect.
- [07:34]
Tom Keene
You know, it's, it's, you know, that's how we roll. That's how we roll. Paul Speedy with Julian Emanuel.
- [07:40]
Paul Sweeney
Julian, what screens well for you guys? Whether it's a sector or a factor, what's screening well for you guys these days?
- [07:47]
Julian Emanuel
So what's fascinating again is we are in one of these rare environments where value stocks are outperforming growth in a tape where the index is up on the year. And that is rare. But for us, what what's even more fascinating is that within that there are a universe of stocks which we've referred to as negative beta. They're mostly value, but day in and day out they've been correlating inversely to the s and P500. And it is in a world where AI has become predominant investment theme, truly portfolio diversification.
- [08:26]
Tom Keene
I want you to talk about what you put your name at the top, but it's Michael Chu, Barack Kurvitz and Stephen Fundozi doing all the work. You have a report, folks. Get it from Evercore isi. It's the best thing on the street Earnings edge. And it's a big long paragraph here. What's the tone so far? Is it a revenue edge? Is it a down the income statement edge? What's the distinction so far that you publish in that document?
- [08:52]
Julian Emanuel
Well, the distinction again, is, is that both, both revenue and, you know, and earnings are just absolutely unprecedented. And again, I referred to this idea that we're going to find out that hyperscalers will probably cross the zero line in terms of free cash flow. But guess what? The rest of The S&P 500 continues to move towards record free cash flow.
- [09:16]
Tom Keene
Julian Emanuel, thank you so much. Really, really appreciate it. Evercore isi, stay with us. More from Bloomberg Surveillance coming up after this.
- [09:29]
Barbara Doran
Get the news you need in just 15 minutes.
- [09:32]
Nathan Hager
Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager.
- [09:38]
Barbara Doran
And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business and foreign
- [09:44]
Nathan Hager
relations, plus one conversation on the day's
- [09:47]
Julian Emanuel
biggest developments, all in just 15 minutes.
- [09:49]
Barbara Doran
Subscribe to Bloomberg Daybreak for a precise, thoughtful take on the stories that matter.
- [09:53]
Julian Emanuel
Listen to Bloomberg Daybreak each morning on Apple, Spotify or anywhere you listen.
- [10:03]
Barbara Doran
You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [10:16]
Tom Keene
Barbara Jones joins us right now with a really interesting pedigree on Wall Street BD Capital Partners here in wealth management, but also lots of work over time with, among others, Leventhal and Lehman Brothers is well, Barbara, what are you doing with alternative investments? I mean, Paul and I are observing another fear missing out. Pop the Nasdaq up 1.2% on futures. Are people in general feel locked into alternatives
- [10:47]
Barbara Doran
in terms of alternatives, if you mean private equity, yes. I mean there's liquidity issues there, but there's also alternative investments include hedge funds and other things. But I don't know if they feel locked in. I think right now the issue in the markets you're at a 22 times P E. You're seeing incredible volatility as rotation out of some of the high flyers and then back again because their profit profile is strong, you know, is going to continue and also worries about when the Fed hikes and what happens with earnings. And I think right now, even though last week, for instance, you saw very strong earnings from the banks, United Air was talking about premium pricing today you had gm, people are holding up, but a lot of this is largely discounted. But I think you're going to see continued volatility here in the market. So people are looking at alternative investments is a different correlation and perhaps less volatility in the short run.
- [11:40]
Paul Sweeney
Barbara, what if for your clients, what do you think is a reasonable allocation to alternatives?
- [11:48]
Barbara Doran
Well, it depends what kind of returns you're looking for. You know, if your clients are really looking to build, you know, for the highest maximum return, I think stocks really are long term the way to be. But if you're looking for low correlation aspects, it's got to be in the alternative investments. And so it depends, you know, the size of the client, but it can be anywhere from 15 to 25%.
- [12:09]
Paul Sweeney
So where, where in alternatives? I mean, you know, it used to be just kind of hedge funds, maybe a little private equity, but now private credits become such a big part of the alts market, real assets as well. Where do you think in the alternative space offers the best maybe risk reward for your clients?
- [12:27]
Barbara Doran
Well, private credit and private loaning, it's been around now since 08, when the banks had to get out of that business. And so the returns are down, but they're still higher than what you can get, say in Treasuries. So I think you still have to be there. I think in private, you know, in venture capital funds or private equity funds, those got to be a long term lockup. And so it really depends on the, on the client profile there. But I think you have to continue to look at private credit hedge funds. It depends. You know, again, hedge funds had their heyday long, short, you know, in the, in the 90s. And so if you want low, you know, low correlation and decent returns, still hedge funds.
- [13:04]
Tom Keene
Paul, can you ask one more adult, responsible question? Because I have so many other questions for Barbara.
- [13:10]
Paul Sweeney
Hey, Barbara, what, what, what role does fixed income play for you and your clients these days? Because some of the coupons just in the treasury market look great. And if you want to take some credit risk, even better than that.
- [13:23]
Barbara Doran
Yeah, because in the credit risk area, even, you know, some of the junk bond or the, you know, low credit, because there's been such low default rates. So you can go, you know, further down and take a little bit more risk. What seems to be risk in the credit area because of that, I think you've got, you can get higher yields, 5 to 6%. So again, it can be a ballast to an equity portfolio which equities are always going to be more volatile in the short run. And so it could be a way to stabilize a portfolio and so that you have this constant steady returns.
- [13:52]
Tom Keene
BARBARA There is a magical door on a side street in Manhattan, and if you stumble into it, as I did once on a summer's day, you are sitting in the history of the Explorers Club. You've just been named president of one of the most prestigious organizations in science and in exploration in the world. Give us a, an update there on the Explorers Club. That goes back to Neil Armstrong and I would guess back to Teddy Roosevelt as well.
- [14:23]
Barbara Doran
Yeah, you know, Teddy Roosevelt, you know, was a member. In fact, the funny thing that we, we always chuckle about is in his application to the club, you know, he was giving his, his exploration cred. And President United States was well down, you know, on the application. But the club actually started in 1904, and it was started by what you think of as the classical explorer types, see the, the polar in the north, North Pole, the South Pole, those, those guys who were the first to get there. And they started as a way to have camaraderie and talk and share their experiences. And so at that time, though, they established, you know, incorporated or whatever the legal structure was then, but said their mission was to support general exploration, share that knowledge, focus on library and archives, but also to develop camaraderie and as they said at those days, to develop the bonds of good fellowship, which is what we try to do today. You know, all that mission is very much intact.
- [15:18]
Tom Keene
Are there bonds of good fellowship at Penn State? D1 lacrosse. I mean, you were all American and lacrosse back when the sport was just exploding into size. Give us, as a former member of the board of trustees of Penn State, give us an update on their athletics.
- [15:35]
Barbara Doran
Well, you know, the big change for, for us, you know, we're part of the, the Big Ten Football Conference, and obviously, Penn State's a big football school. In fact, we have one of the largest stadiums. You know, we're. But the big change last fall was the football coach, and that's a big deal. And so we're all waiting to see what happens, because it came at an awkward time in terms of recruiting and that sort of thing. But the athletics department, of course, nil. And there's major changes of college sports, which I think we're still, a lot of schools are working out. It's really changing the complexion. And you're seeing everybody fighting for money. You know, certainly it's a question about women's sports. You know, who gets what share.
- [16:15]
Tom Keene
Exactly. Can you imagine Paul the nil. Barbara Duran would have would have taken down in lacrosse and field hockey, you know. Exactly. Beyonce so.
- [16:27]
Barbara Doran
Well, I'm not so sure those sports would have gotten a lot. But you do see women's basketball.
- [16:30]
Julian Emanuel
Oh yeah.
- [16:31]
Barbara Doran
You know, really getting a major share even, you know, Penn State women's basketball has not been one of the top teams. Hopefully we have a new coach and we'll get there. But some of those players are making some pretty hefty.
- [16:42]
Paul Sweeney
Absolutely. Staying in colle opposed to going pro. Barbara, what's the, what's the question you're getting from your clients these days? Is it that boy, the market's so high so fast and I'm concerned here or I feel like I've missed out. What's the question you're getting from your clients now?
- [16:57]
Barbara Doran
You, you know, it's very interesting you asked that because just a few days ago I had a client, you know, right. Say hey, you know, it seems that high PEs and all these high flying stocks, what do you think? You know, my response there was, you know, that this the stock market, yes is, is at 22, it was at 23 at year end. But a lot of these high flyers, we've seen this the last two years where you know, the Nvidia of the world get knocked down periodically profit taking, you know, which makes sense. They run up, you know, beyond where they, you know, maybe in the short term and rotate into laggards and devalued stocks. But then because the growth profile is very much intact, the money starts to come back. And certainly you saw that in spades this last week or so. You know, one of the things that was interesting when the SpaceX, you know, IPO is coming, I had a number of inquiries, you know, about that and how can they participate in my recommendation uniformly was do not get into that, you know, when you see that massive size and also the amount allocated to retail, you know, and also when you looked at the fundamental profile and how long it will take to make money in the cash outflow and also all the lockup stock that's coming out, I said straight away I had one client who insisted and so I'm not saying a word. But anyway, Barbara, thank you.
- [18:11]
Tom Keene
Thank you so much and particularly your public services President of the Explorers Club, Barbara Dorn with us here this morning, folks, CEO of BD8 Capital Partners. Stay with us. More from Bloomberg Surveillance coming up after this.
- [18:32]
Dennis Blair
Foreign.
- [18:37]
Barbara Doran
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg business app or watch us live on YouTube.
- [18:50]
Tom Keene
It is without question the research note of the day. I'm sorry, Julian Emanuel drop sack and knocking off the pedestal here. He's with Pajim and it is a shockingly terse note. And three rate increases. You don't mince words. You think consensus is just flat out wrong.
- [19:09]
Rob Sarkin
Yeah, I mean when we look at inflation, which is really what's driving Fed policy, all the fundamentals to us point toward upside risk to inflation. You have above trend GDP growth. We have a labor market we think is heating up. We have a range of supply side challenges, energy, but also in trade, labor, all these things where you think are going to keep inflation elevated.
- [19:29]
Tom Keene
And the Fed hawk I quoted Orszag and Posen, I think it was out in January, maybe my note of the year. But they are with you looking for sustained lift is because of labor market pulling in to the Orzag Posen wage growth. That gets us there.
- [19:44]
Rob Sarkin
That is part of it. You know, one of the most concerning parts of inflation are what we're seeing in non shelter services. That's the majority of core pce, which is what the Fed's looking at. And that's running at high levels, shown no progress over the last year. And we think the labor market is tightening. Wage growth is going to feel upside pressure that can put more pressure on those sticky inflation numbers. That's why I think some Fed officials are starting to talk about with the backdrop that we have now, we can't be confident we're going to trend back to a 2.0% inflation rate. More like the mid twos maybe or high twos. But we need some rate hikes here. Do we think to, to. To bring inflation back to target.
- [20:23]
Paul Sweeney
So last week soft CPI and to a lesser extent PI data, was that more a function of energy prices coming down during the initial days of kind of this memorandum of understanding kind of thing?
- [20:34]
Rob Sarkin
Yeah, I mean energy prices were a big part of it. I mean admittedly that report was much softer than we were expecting. It looks very unusual. You know there were some big downside movers that month. If you look at something like the Cleveland Fed's median CPI that was up closer to 20 basis point month over month. You know, core CPI fell in the official reports. That's a bit odd. Historically we don't think it's going to repeat. We think it's more of an anomaly and we're looking for firmer inflation numbers the next few months. Now we get A few more months of very soft numbers. We'll have to reconsider our Fed call but we think it's an anomaly, not
- [21:07]
Paul Sweeney
the new rule you mentioned that labor markets heating up. What is your view of the US labor market here? It feels like we've been at and continue to be pretty darn close to full employment here.
- [21:16]
Rob Sarkin
Yeah, I mean we're, we're looking at payrolls growth over the last few months. You know we had some downward revisions, a downside miss a bit in the last report, but we're running over 100,000 jobs per month. We think that's well above the break even rate to keep the unemployment rate constant. Given that we're having no or very weak labor supply growth and that's putting downward pressure on the unemployment rate. I think companies that's very consistent with the above trend GDP growth that we're seeing this year.
- [21:42]
Tom Keene
How do your managers respond to the prima donna walks in the room and says three rate increases which is priced down, yield up?
- [21:52]
Rob Sarkin
I think, you know we have pretty, we have a lot of debates at work but pretty broad support.
- [21:58]
Tom Keene
Peters are going at it.
- [21:59]
Rob Sarkin
Yeah, we have pretty great debates but I think we're aligned on this view that when you look at inflation over the last several years, you see that's been well above target and these fundamental drivers are going to keep it there. And when we hear from Chairman Warsh, but the broader Fed, they all sound quite hawkish. Even after that soft June cpi, you know, the tone across the board we think is reaching a hawkish critical mass. And that's another way of saying we think the bar for rate hikes is relatively low and it's only going to take somewhat firmer inflation data to get them to move.
- [22:34]
Paul Sweeney
Do you think the. What do you take away from Chairman Warsh's comments that we've had? We speak, he spoke in Portugal, he had his one meeting Fed meeting. Can he really go on a rate hiking policy here given maybe some of the political pressures he has?
- [22:52]
Rob Sarkin
Well, you know, I would say two things. One, you know, my number one takeaway from all of Chairman Warsh's comments so far is this idea of getting inflation back to 2% 0.0% without rounding, not in the vicinity of target, but getting inflation back down to target. And that is why, you know, major reason we think they're going to hike rates. Now on the political front, you're remarkably calm there. So far we haven't seen much response from the administration and you know, everything that we're seeing and hearing is that a Warsh is going to be independent and b you know that the administration doesn't seem to too perturbed with his communication so far, which has been quite hawkish.
- [23:35]
Tom Keene
This has been brilliant. Can come back tomorrow at least. Next week's the Fed meeting, right?
- [23:41]
Rob Sarkin
Next week's the Fed meeting.
- [23:42]
Tom Keene
I got it penciled in. The Fed decides.
- [23:43]
Paul Sweeney
Yes, exactly.
- [23:45]
Tom Keene
Rob Sarkin, pjim, thank you so much. Stay with us. More from Bloomberg Surveillance coming up after this.
- [23:56]
Barbara Doran
The Bloomberg Sustainable Business Summit returns to Singapore on July 22. Our 5th annual Asia Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience and driving a multi speed energy transition across Asia's diverse markets. Join us for solutions driven discussions and networking opportunities. Thank you to our summit advisor, Bangkok bank. Learn more@Bloomberglive.com SBS Singapore. You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
- [24:43]
Tom Keene
We're going to take time out now for an article that this summer has come out of the screen. The Mirage of China's Military Edge. Panic is misguided and counterproductive and what matters is the author is Dennis Blair with his service to the nation and the Navy on the Pacific Rim and also as former Director of Intelligence. Dennis, thank you so much for joining us. Your article is absolutely riveting. Is this like our misjudgment of the Soviet Union intelligence in 8,788 into 89? Do we misjudge China?
- [25:25]
Dennis Blair
I think that the there are big differences between the situation with the Soviet Union. Our information on China is much more clear. It's more of an out in the open debate and that the problem is that it has not been put in terms of the real military tasks involved. The most of the commentary on it has been just look how many ships China's building, look how many, look how how many airplane missiles and nuclear weapons. And that means that they are going to overtake the United States. And what I try to do is put it in the context of the very tough military missions that face China due to a number of factors.
- [26:12]
Paul Sweeney
What is I guess for most Americans we think about China, one of the key flashpoints and areas that people do focus on is Taiwan. What's the current situation with China, Taiwan and the United States?
- [26:24]
Dennis Blair
Oh, that's a very complicated question. I mean ever since the China won the civil war, ever since the Chinese Communist Party won the civil war back in 1941. And the Communists under Chiang Kai Shek fled to Taiwan, set up their defensive defenses there, their system there. China has wanted to end they finish the civil war by capturing what they see as the last remaining rebel holdout. And this has been true from Mao, Deng Xiaoping all the way to the recent side. So this has been a longstanding, long standing ambition of China and in fact China's regime has put a lot of its legitimacy on doing that. But in the meantime, Taiwan has been able to defend itself. It's become a vibrant democracy. It's become a very important economic power in its own and its own right, drawn closer to the United States. So it's basically a case of thwarted Chinese ambition, Taiwan's development and the United States sticking with its long term policy of not allowing another potentially hostile power in Asia to become so powerful that it dominates the region. And that's all been playing out in various tactical instantiations.
- [27:56]
Paul Sweeney
President Xi is scheduled to come to the US meet with President Trump in September. What do you think the U.S. i don't know position should be vis a vis China today?
- [28:08]
Dennis Blair
I think the position should be that, that there will be no. It was pretty well laid out in, in the Taiwan Relations act which was passed back in 1979 by the Congress is produced, has been enormously useful and enduring policy. It says basically that there won't be a change in the, in the status of Taiwan by force. That's American policy. So the United States is perfectly willing, perfectly willing to compete economically, to compete diplomatically on values and so on. But it just says that China will not, will not use military force and that's a good policy and I think the President should continue it.
- [28:53]
Tom Keene
Admiral Blair, you were the follow on to what I know of Nimitz and Spruance with your ability to control the Pacific Command for the United States Navy, your work as a Rhodes Scholar and of course coming out of Annapolis. With great respect, I have to ask your opinion of the officer selections and non selections by our Secretary of Defense. It's a sensitive issue, but you have more experiences than anybody I think I know except that young buck Stravitas.
- [29:28]
Dennis Blair
Right? Right. Yeah. No, Admiral Tavitas is a fine officer and I think that the, I think that the interference in the promotion system is terrible by, by the current administration led by the Secretary of Defense. It's, it's applying criteria which are not the most important ones, which are how well officers have done in their operational jobs and how much potential they have for the future. That's best known by their peers who, to make up the selection boards that choose them and to take the results of those selection boards and arbitrarily change them for reasons that are never explained or announced. Both gives us a politicized, less competent senior officer corps and discourages the many people of talent but diverse backgrounds which, which has always been the American strength. So I think it's, I think it's a very bad thing and I look forward to it being reversed by a future administration.
- [30:38]
Paul Sweeney
Admiral, we're all focused on the Strait of Hormuz here. I think we're all kind of learning at the same time how important that strait is. The administration has said that our military forces have decimated the Iranian navy. Yet, yet it seems like Iran still controls the Strait of Hormuz. How do you square those two things here? What's going on with just the naval operations in that part of the world?
- [31:05]
Dennis Blair
Well, the Iranian navy, that is ships and aircraft and so on, is not what controls the strait. What controls the strait are these irregular maritime forces, speedboats, short range missiles and drones being fired from the, from hidden and protected sites. So because the Strait of Hormuz runs so close to Iranian territory, you don't need a big navy to control it, to cause damage to ships going through it. You just need missiles and drones and speedboats coming out of caves and rocks and, and protected ports along that, along that extended Iranian coast. So the, the, what the United States must do is go to traditional straight opening tactics, which is, which is escorting, escorting merchant ships through, just continuing to destroy these irregular forces that, that threaten, threaten them and, and keep the strait open by force, which we are very capable of doing.
- [32:18]
Tom Keene
Admiral Blair, I have 14 more questions. Paul has 12. You got to come back. Admiral Blair, thank you so much for your public service, driving all of our Pacific Rim for the Navy years ago and an incredibly terse, important essay in Foreign affairs magazine. Full disclosure, I'm a member of the Council on Foreign Relations. Paul, that was just extraordinary.
- [32:41]
Paul Sweeney
Yep, absolutely. And it's, you know, putting the focus a little bit back on China because again, we're going to have President Xi coming to the US and you know, obviously all focus has been on the Middle east and the Ukraine, but Admiral Blair asking us to kind of make sure you don't forget about China and what's going on there and assessing.
- [32:59]
Tom Keene
Well, I don't think we've got any. We're not showing the flag in the Pacific Rim because everything's over in the Indian Ocean. Then all the rest of it has. This is what we're trying to do, folks, is to give you the best in conversation we can with people with real, real experience. We thank Admiral Stavitas for leading our military coverage over the many years. Dennis Blair in the Foreign Affairs Magazine
- [33:24]
Barbara Doran
this is the Bloomberg Surveillance Podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 7 to 10am Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.
- [33:54]
Nathan Hager
Hi, I'm Barry Ritholtz inviting you to join me for the Masters in Business podcast. Every week we bring you conversations with the people who shape markets, investing and business. I speak with CEOs, Nobel laureates, market innovators and legendary investors. Whether you own stocks, bonds, real estate, commodities, even crypto, these are discussions you absolutely need to hear. Subscribe to the Masters in Business podcast on Apple, Spotify or anywhere you listen to.