Tech Rises as Iran War Looms Over NATO Summit

Summary

Bloomberg Surveillance: "Tech Rises as Iran War Looms Over NATO Summit"

Date: July 6, 2026
Hosts: Tom Keene, Paul Sweeney, Karen Moskva
Guests: Joe Davis (Vanguard), Kelsey Burrow (JP Morgan), Andrew Slimmon (Morgan Stanley), Becca Wasser (Bloomberg Economics)

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Episode Overview

This episode dives into the intersection of surging tech investment, inflation trends, global bond markets, and the broader implications of looming geopolitical events—particularly the Iran war and upcoming NATO summit. The hosts welcome leading economists and strategists to unpack the U.S. economic landscape (labor, stimulus, inflation), the ongoing AI-driven tech boom, global investment opportunities, and a deep-dive on U.S. military preparedness in the face of changing warfare dynamics and shifting alliance politics.

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Key Discussion Points & Insights

U.S. Labor Market, Stimulus, and Inflation

Guest: Joe Davis (Vanguard)
Timestamps: 01:56–07:05

• Labor Market Stability:
  • Despite a tick up in unemployment (near 4.6%), Davis sees "roughly in balance," not as weak as some suggest.
    • "There are pockets of softness... But it is not as weak as some say." — Joe Davis [02:19]
• Stimulus & Policy:
  • Fiscal and monetary policy is "roughly neutral," not heavily expansionary or contractionary.
    • "Policy, loosely speaking, is roughly neutral where we're at fiscal, monetary combined." — Joe Davis [03:18]
• Inflation’s Current and Future Trajectory:
  • Oil price drops are softening inflation, but local demand and AI-fueled investment are sustaining growth.
  • Davis pins future U.S. GDP growth near 3% for 2027, stronger than consensus forecasts, driven by AI investment.
    • "AI investment thrust... is approaching levels we have rarely seen outside of some pretty transformative technologies." — Joe Davis [04:12]
• Globalization & Structural Inflation:
  • De-globalization (onshoring/friend-shoring) will gradually elevate inflation by 0.2–0.3% per year.
    • "If we froze the pace of globalization... that will push up inflation..." — Joe Davis [05:17]
• Savings Flows:
  • Inflows to investment vehicles reflect public optimism and willingness to delay consumption for long-term growth.

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AI Buildout, Corporate Bonds & Global Markets

Guest: Kelsey Burrow (JP Morgan)
Timestamps: 09:19–16:53

• Corporate Bond Appetite & Tech Issuance:
  • Strong demand persists for investment grade and high-yield bonds, driven by robust fundamentals and attractive yields.
    • "Companies... have passed all these tests with flying colors... there is a really amazing build out of AI." — Kelsey Burrow [09:37]
  • Tech sector’s share of the investment grade market grew significantly (from 10% to 14–15%), led by hyperscalers and associated infrastructure projects.
• Investment Strategies:
  • Opportunities in energy and utility hybrids, bank paper, and data center financings, especially those linked to the AI boom.
  • Need for due diligence in non-traditional “project financing” deals, particularly data centers.
• Global Investment Outlook:
  • Emerging markets like Mexico and Brazil present high real yields, as local inflation expectations recede and nominal rates remain elevated.
    • "We do really like the local market in Mexico... those real yields look compressed when you look at the high spot inflation rate. But when you look at the forward path for inflation, that’s going to start to come down..." — Kelsey Burrow [14:19, 15:04]
• Credit Risk Calibration:
  • In the U.S., current Treasury yields mean investors can take modest credit risk for attractive, historically strong, returns.
    • "Returns for the U.S. treasury market... the 10-year yield is up about 45 basis points on the year. But total returns and Treasuries is slightly positive." — Kelsey Burrow [16:00]

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Tech, Earnings, and AI 'Bubble' Concerns

Guest: Andrew Slimmon (Morgan Stanley)
Timestamps: 19:06–25:49

• Earnings Growth vs. Market Valuation:
  • 2027 S&P 500 earnings estimates have risen sharply ("$33" above start-of-year levels), outpacing stock prices and reducing the risk of overvalued markets.
    • "As long as the E is going up faster than the P, that means the P/E isn't inflating... a much healthier market." — Andrew Slimmon [19:42]
• AI ‘Bubble’ Pushback:
  • While AI is seen as a hot sector, Slimmon argues valuation is not excessive, as current earnings revisions and demand outpace expectations.
  • "I keep hearing these companies say numbers are too low. Bring your numbers up. And then I look at valuations, and the valuations are not that extreme." — Andrew Slimmon [21:23]
  • Memorable concept: “Invest into scarcity.” Focus on supply-constrained sectors like memory and computing power.
• Fed Policy Impact:
  • New Fed chair is signaling less liquidity and quantitative easing—leading to restrained P/E multiple expansion and dollar strength.
    • "No more quantitative easing... they're changing the, you know, the change in the nature of what they're doing." — Andrew Slimmon [23:02]
• Stock Market Participation:
  • Slimmon says positive earnings trends matter more than fears around war, AI disruption, and macroeconomic risks.
    • "The most important thing is to boil it down to simplicity. A stock price is the present value of future expectations." — Andrew Slimmon [24:17]

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U.S. Military Readiness, Drones, and the NATO Summit

Guest: Becca Wasser (Bloomberg Economics)
Timestamps: 27:48–36:15

• America’s Drone Deficit:
  • U.S. lags far behind Russia and Ukraine in mass drone production and battlefield flexibility.
    • "The United States is massively behind... the US has been slow to adopt drones into its arsenal and hasn't been focused on trying to procure or produce them at the sheer number that you would need." — Becca Wasser [28:44]
  • Rigid procurement and lack of “attritable” drones (cheap and expendable) hinder modernization.
• NATO Summit Stakes:
  • High expectations as President Trump heads to Turkey. European allies hope to maintain U.S. commitments by boosting defense spending and purchasing U.S. weapons.
    • "They're trying to hope that they can stave off some of the worst from happening... efforts to try and fill some of the capability gaps." — Becca Wasser [31:16]
  • Poland’s defense strategy and massive purchases make it a “model ally”; other countries (e.g., Spain) may face reduced U.S. commitment over Iran war access.
• Ukraine Outlook:
  • Continued support for air defense (Patriots) and diplomatic flexibility; no end in sight to the Russia-Ukraine quagmire.
    • "I think we're going to see a continued holding pattern there... Kiev is going to double down on their willingness to hold talks with Russia." — Becca Wasser [33:57]
• U.S. Industrial Mobilization:
  • Drone factory locations are deliberately spread across diverse states to boost local economies and workforce diversity.

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Memorable Quotes & Moments

• “AI investment thrust... is approaching levels we have rarely seen outside of some pretty transformative technologies.”
  — Joe Davis, Vanguard [04:12]

• “There is a really amazing build out of AI and everything that goes around AI.”
  — Kelsey Burrow, JP Morgan [09:37]

• “Invest into scarcity.”
  — Andrew Slimmon, Morgan Stanley [21:23]

• “The United States is massively behind... not learning the right lessons from Ukraine’s war against Russia and its drone war.”
  — Becca Wasser, Bloomberg Economics [28:44]

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Notable Timestamps

• 01:56–07:05: U.S. Labor Market, Stimulus, and Inflation with Joe Davis
• 09:19–16:53: Corporate Bonds & Global Market Outlook with Kelsey Burrow
• 19:06–25:49: Tech, Earnings, and Valuation with Andrew Slimmon
• 27:48–36:15: U.S. Military & NATO Summit with Becca Wasser

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Tone and Language

The conversation remains fast-paced yet accessible, toggling between economic jargon and practical takeaways, often punctuated with irreverent humor and banter (e.g., “Are the White Sox for real?”). Guests are candid and direct, offering clear calls on growth, risk, and policy while not shying away from big-picture, sometimes poetic reflections on markets, warfare, and political uncertainty.

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Summary Takeaways

• U.S. growth remains resilient, driven by AI and healthy investment sentiment; inflation risks persist but are manageable.
• Opportunity in bonds is shifting, with AI buildout reshaping both tech and infrastructure sectors; global and U.S. credit markets remain attractive.
• AI and tech expansion is strong, but not a bubble, as fundamentals and earnings support valuations.
• Geopolitics are front and center with NATO, Ukraine, and the evolving nature of warfare—a warning that U.S. military adaptation in drones and new technologies is lagging and in urgent need of revitalization.

For those seeking a pulse on how technological, economic, and geopolitical currents are shaping the investment and security landscape, this episode delivers hard facts, strong opinions, and insights for the months ahead.

Transcript

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[Bloomberg Surveillance Host]

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[Tom Keene]

to what a wonderful way to start the week. Joe Davis joins from Vanguard right now. I can't say enough about the clarity of his note. Joe, the thing that I notice in your note is we migrate. I mean rounded up 5% and being inflammatory 4.6% unemployment rate. Is that still a fully employed America?

[Joe Davis]

Well, I think it's close to a time and again what a wonderful way to start the week being on the show again, the unemployment rate, typically economists will say it's a lagging indicator. I couldn't think of a more important one right now just because of these cross currents, right? We have a labor supply in the United States that for some time is going to be muted or low number of people entering the workforce at the same time. We've had the demand come down the past two years for a number of reasons. I'd Say it's roughly in balance. There are pockets of softness clearly versus the heady days of COVID three, four or five years ago. But it is not as weak as some say that I would that that is clear to us.

[Tom Keene]

Are we still under the guise of stimulus? I mean there was this stimulus that many people ascribe a third Covid stimulus is a Biden stimulus and then other stimuli from there on. Are we still goosing the economy?

[Joe Davis]

I'd say that's tough argument to push too hard, Tom. I mean I, I see where you're trying to go, but at the same time we've had oil prices, they've come down now, but we've had some of that volatility in the cost of living for many consumers more than offset some of the fiscal which we were going to see benefits of in 2026. And then of course you have the monetary policy, which our theme for some time they're not as restrictive as they think and you just have to look to the inflation rate. We're in this territory where the Federal Reserve, we've been highly vindic. They were not going to see this significant easing. It's the wrong benchmark. So I think policy, loosely speaking is roughly neutral where we're at fiscal, monetary combined.

[Paul Sweeney]

Joe, we've got WTI crude oil now below $69 per barrel. Does that mean we don't have any inflation problems out there?

[Joe Davis]

Well, yeah, I would hope with a lag. I mean we've been expecting inflation to come down a little bit less so than the average economist, but it's still been above our forecast, admittedly. So I say that with reserv, but I tell you, we look into 2027 despite the headwinds that we have from a demographic, some of the tensions globally, we are pushing the 3% GDP growth next year. For the United States, that's materially above expectations. It primarily comes down to the AI investment thrust, which is approaching levels we have rarely seen outside of some pretty transformative technologies emerge.

[Paul Sweeney]

So Joe, I mean one of the concerns I think a lot of folks have about just thinking about inflation going forward is if we are in this kind of reshoring on shoring friends, shoring America first type of manufacturing, does that suggest that just prices in general should be higher than they were over the last, I don't know, 30, 40, 50, 60 years?

[Joe Davis]

Well, if we froze the pace of globalization, which I think is a fair baseline, which means we don't increase our exports and imports, imports as a percentage of our economy, as we did over the past 20, 30 years with the rise of China and the WTO and so forth that we just hold steady and that's will push up inflation by our calculations and we have a deep Data set roughly 0.2% a year, maybe 0.3 if you push it. So that would be inflation maybe not 2% but perhaps even closer to 2 and a half percent. That is not you just say that's zero but it's not pushes us into a higher inflation world. The arithmetic just you cannot get there

[Tom Keene]

without getting in trouble. Compliance on a Monday we usually say this question for Wednesday, Joe, but I'm going to throw it out today. As an economist and you're looking at chapter 23aman Q or chapter 23 when you know introductory economics is an economist, what does it mean when you see the wall of money coming into your Vanguard?

[Joe Davis]

Well, I think it shows the entrepreneurship and the conviction of longer term returns on capital for savers and investors. I think there's probably not a better indication of positive long term sentiment for the average citizen than deploying their hard earned savings through hard work. And they're putting it into foregoing consumption today for higher return in their own future. And so we continue to see that higher term conviction of course the positive markets helping that sentiment. But I think that sometime is lost. And Tom, you're getting right at it and that's a powerful force for the United States. It says that our economic assessment is not outlandish by any means.

[Tom Keene]

Thank you, thank you. Joe Davis with Vanguard. Greatly appreciated this morning. This is the way we roll on surveillance. We move from the good economics of Joe Davis and Vanguard. Stay with us. More from Bloomberg Surveillance coming up after this.

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[Tom Keene]

Right over to JP Morgan and Kelsey Burrow is well, I thought Joe was very eloquent there about just the enthusiasm in America to invest. Is there still an enthusiasm off the JP Morgan bondest? Are people on the bid buying bills, notes and bonds?

[Kelsey Burrow]

Yeah, I would say, particularly when you look at investment grade and high yield, we've seen very strong demand and that's a function of both high all in attractive yields and also the fundamentals. The fundamentals just look very good for these companies. They've had to prepare for a number of different shocks over the last few years, whether it be tariffs, whether it be the energy shock, and essentially they've passed all these tests with flying colors. And at the same time there is a really amazing build out of AI and everything that goes around AI.

[Tom Keene]

There's no dearth of appetite there, right?

[Kelsey Burrow]

No, there's not.

[Tom Keene]

Can Paul set up a ladder? Maturity hyperscalers?

[Paul Sweeney]

What what do you guys think about just all this new issuance coming out of the tech sector?

[Bloomberg Surveillance Host]

Yep.

[Paul Sweeney]

I mean, I'm assuming you got the phone calls like everybody else to buy all these things and how do you think about that?

[Kelsey Burrow]

Yeah, so it's interesting. A few years ago if you would have asked me about the tech sector as a bond investor, I would have said, well, it's interesting, but it's really a small part of our market. It's not really something that is going to drive spreads or the narrative. And obviously that has changed a lot. And the tech sector of the investment grade market has moved from 10% moving to 14, 15% and that's being led by the issuance of the hyperscalers, which from a balance sheet perspective are very high quality relative to the average of the investment grade universe. I would say where we're finding the most opportunity is looking beyond the average index level for investment grade at 5% and looking where what I would call kind of the extended sectors of investment grade where you can actually pick up an additional 100 basis points of yield. These are things that are backed by investment grade issuers, oftentimes investment grade rated, but for a number of different structural reasons, trade with a significant yield pickup and trade more like high quality, high yield.

[Paul Sweeney]

You know an example of that.

[Kelsey Burrow]

Yeah. So some of those examples and these are linked to the AI build out. So things like energy and utility hybrids. So lower down in the capital structure also, you know, the banks are picking up their lending, they want to get involved with this too. So we do like bank capital. So bank paper that's lower in this, in the capital structure. Also when you look at some of these data center deals and we do think you have to be kind of very careful with the data center issuance because these are a little bit different than your traditional deals in terms of, they're more like project financing. And each deal has its own, own individual details associated with it that you need to be careful about. But those are other opportunities as well. And then if you look at the long end of the curve in terms of the hyperscalers, you know, you are seeing fairly steep credit curves there, which we do think is warranted given all of the longer term risks. But these are again areas where you can pick up some significant yield relative to the index and be very involved with the AI and secular growth themes that we're seeing in the market right

[Paul Sweeney]

now about opportunities outside the US whether it's developed markets or emerging markets.

[Public.com Advertiser]

How do you guys think about that?

[Kelsey Burrow]

Yes, so there are a lot of opportunities. You know, I have a background in US rates and I look at the global rates market, what is priced into different central banks. And I do think that there's a lot of opportunities, particularly in markets where rate hikes may be somewhat overpriced. Particularly outside the US We've seen this amazing retracement in oil. I mean the speed in which oil has come down from the highs and normalized back to pre war levels has been incredible. And at the same time, the thing that caused central banks to be hawkish has unwound. But some of that hawkish pricing is still in the markets. And so where there are areas in the emerging markets, for example, like Mexico, which is Closer to US and India, further away where those central bank hikes may not, actually, they may not follow through with those hikes. And there's value.

[Tom Keene]

Do you have an intern from Pace University doing a FIFA adjusted international matrix? Like, you know, are you, are you selling or buying Mexico?

[Kelsey Burrow]

Yeah, no, we do really like the local market in Mexico. So Mexico, em. And you know, I think that's a great idea for a project. We have a number of interns here at our desk.

[Tom Keene]

And Brazil, come on.

[Kelsey Burrow]

These are areas where you have very high real yields and there are areas

[Tom Keene]

where the head coach has a very short shelf life.

[Joe Davis]

Exactly.

[Tom Keene]

But it's like. But again, this goes back to inflation adjusted yields.

[Kelsey Burrow]

Yes.

[Tom Keene]

Is what it's about. So do the. Take a. Take Mexico, do the mathematics there. What's their nominal yield? Less inflation.

[Kelsey Burrow]

Yep.

[Tom Keene]

How many basis points, how many percentage points do you pick up? Just do it in your head.

[Kelsey Burrow]

Yeah, well, I mean it's Monday morning.

[Tom Keene]

Yeah.

[Kelsey Burrow]

So I mean right now you're looking at a yield in Mexico of 9% on the 10 year. And that's obviously without inflation. And we like to look at the forward expectations for inflation rather than the spot inflation. Yeah, I mean it makes sense. Right. We've been just through this big inflation shock with energy and so you know, the real yields look compressed when you look at the high spot inflation rate. But when you look at the forward path for inflation, that's going to start to come down and you're seeing high real yields really across the board, not just in emerging markets, but also in the US we're at the higher end of the range for real yields right

[Paul Sweeney]

now in the US how much credit risk do you think investors should be taking here? Because they can get a four spot 10 on the two year treasury, which is a nice return, nice coupon for a lot of folks. How much credit risk above and beyond that?

[Kelsey Burrow]

Yeah, I think that's, that's a really good point. Just about the, the yields in the treasury market relative to history. And the reason why that matters is if you think about it, right. A few years ago, if you were to see a 50 basis point increase in the 10 year treasury yield, that would essentially wipe out all of your income for the year. Right now actually, if you look at the returns for the U.S. treasury market, you know, the 10 year yield is up about 45 basis points on the year. But total returns and Treasuries is slightly positive.

[Joe Davis]

Right.

[Kelsey Burrow]

And that is, you know, the power of the starting yield and the income.

[Paul Sweeney]

Yep.

[Kelsey Burrow]

Now on top of that our outlook for the economy is is pretty good right now and so with the fundamentals in the credit market I think there is a lot space to to look beyond Treasuries and to look at corporate credit but also securitized credit is an area where we have a lot of focus.

[Tom Keene]

Kelsey Barrow thank you so much JP Morgan. What we love to do an economic view of bond view. Thank you Kelsey Barrow of Vanguard and JP Morgan as well. Stay with us. More from Bloomberg Surveillance coming up after this.

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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.

[Tom Keene]

When Andrew Slimmer joined Morgan Stanley a few years ago, it was 3,000. Yeah, I'm sure something like that. December 31, 1991 joining us now with the tersest wisest note on the street, Anders Lyman joins a supplied Equity advisors at Morgan Stanley Investment. And you know I love your note and what I really love about it is the shock that we haven't really priced in this Earnings and revenue boom. That surprises me. Didn't we do that 90 days ago?

[Andrew Slimmon]

Well, yeah. I mean, Tom, look, earnings estimates are going up faster than the market is. And, you know, my belief is that, you know, obviously people ask all the time, where is the market going to end the year? I'm sure they ask you that. And when we get to the end of this year, all that's going to matter is what is that 2027 earnings number? Because we're not going to care about 2026. And the reality is that earnings number started this year at $357. It's at $400 today. Now that's 2027 earnings. So it's up. It's up, you know, a whopping $33. And if you look at the quarterly beats by the S and P, they're accelerating. The first quarter was a bigger beat than every other quarter over the last year and a half. The ISM is going up. So it seems to me we might still be too low on that $400. And if it say it's $420, you put 20 multiple on it, that's 8400 on the S and P. So, yeah, there's bumps along the way. There'll be question marks. But as long as the E is going up faster than the P, that means the P E is an inflating. I think that's a much healthier market than a market that's just going, being revalued higher on a, you know, on a PE basis.

[Paul Sweeney]

Andrew, I'm sure at cocktail parties people corner you and they say, hey, what's the AI story out there? How do I play AI? What is your view now that we're three to four years into this whole phenomena?

[Andrew Slimmon]

When I got caught on cocktail parties, I hear the same thing, Paul, which is it's in a bubble. AI is in a bubble. And again, I go back to, well, if I look at the memory names, what's a bubble? If you think about bubble? But bubble is excessive expectations of growth and excessive valuation. Well, what I hear is I keep hearing these companies say numbers are too low. Bring your numbers up. And then I look at valuations, and the valuations are not that extreme because the market knows that this is potentially cyclically high earnings. So the market isn't getting over its ski and overpaying for their earnings. So I think the reality is this is going to go longer than people think. One of the great comments that I heard, Paul, which I think is really important to consider, is investing into Scarcity. Invest into scarcity. What does that mean? Well, there's a scarcity of memory, there's a scarcity of computing power out there. You want to invest in areas where there is more demand than supply. And I think those are two areas where there's more demand than supply currently.

[Tom Keene]

Paul, would it be rude if I just steal that from Andrew?

[Public.com Advertiser]

I'll take it.

[Tom Keene]

Yeah, I think I should. I mean, you know, if you get a parchment from the University of Pennsylvania, you go right to chapter one.

[Joe Davis]

Exactly.

[Tom Keene]

Lawrence Summers father was, was teaching there. You go right to chapter one on scarcity. I love that.

[Paul Sweeney]

So Andrew, we've heard a couple times now from this new fed chairman here, Mr. Wash, first at his meeting and then secondarily over there in Portugal. What are you taking away from our new Fed chair?

[Andrew Slimmon]

What I take away from my little whirlpool is that multiples aren't going up. And the reason I say that is that what I hear is no more quantitative easing, no more flooding the mark. You know, we're not going to buy as much, we're not going to expand the balance sheet, we're going to contract the balance sheet and that means less liquidity. Less liquidity equals no more PE expansion, potentially PE contraction. So that's, you know, that's why when I said 20 times, well, the market's trading at a little higher than 20 times. So I think I just don't see a market, it can move higher on valuation. The other thing I think is, I think it's bullish for the dollar and that's one of the reasons why the gold has sold off is it's, it's a dollar bull move. Those are the two messages that I heard. It's not the Fed's raising rates but they're changing the, you know, the change in the nature of what they're doing.

[Tom Keene]

If the fancy people been wrong, Andrew, is it, you know, I get the fear of missing out in retail steps in with great faith. But from where you sit, with decades of experience, are the fancy people participating or they've been too cute in and out of the market.

[Andrew Slimmon]

Hey, Paul. The most important thing is to boil it down to simplicity. A stock price is the present value of future expectations. What has been going on for the last year and a half is companies have come out and said the raise guidance. Raise guidance. That means future expectations are going up. That is why the stock market is going higher, because the stock companies overall, not all obviously are doing better than expected. So to the extent that people have been too concerned with, you know, the war, AI disruption, private credit. These are all the pushbacks, the deficit. I keep saying. Yeah, okay, those are things to worry about. But don't lose sight of the fact that earnings revisions are going up. That means the future value is better.

[Tom Keene]

Chicago Question Andrew, come on. Are the White Sox for real?

[Andrew Slimmon]

Boy, oh boy, that's the toughest question you've asked me all day. You know, it's baffling. Are they really that good or is the division really that bad? You know, so we'll have to see. But it's an exciting time to be

[Tom Keene]

a Chicago great 121 losses last year. All you need to know, folks, that's a lot of loss and turn it around with a little bit of a saintly blessing from Rome as well. Andrew Slimond, thank you so much with Morgan Stanley Chicago there. Stay with us. More from Bloomberg Surveillance coming up after this.

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[Carol Massar]

hi, I'm Carol Massar with a helpful tip to keep you plugged in throughout the market day. Subscribe to the Stock Movers Report from Bloomberg. These are short audio episodes, five minutes or less, delivered right to your podcast feed. Stock Movers fills you in on the day's winners and losers on Wall street and tells you about the news and data that's driving those gains and losses. Why spend all day watching watching tickers scroll across your screen? Subscribe to Stock Movers today on Apple, Spotify or anywhere else you listen.

[Bloomberg Surveillance Host]

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.

[Tom Keene]

There is a treat today. I'm Bloomberg. I've been going back with Tim o' Brien, who runs all of Bloomberg Opinion for us. Max Hastings, forever associated with the Telegraph and writing for Bloomberg Opinion, truly one of the age's definitive historians, has a stop traffic essay out today. It was picked up by NDTV in India, among others. Here's the headline, US Military Dominance is under Serious Threat. That from the venerable Max Hastings. We are honored that Becker Wasser could join us today, defense lead for all of Bloomberg Economics. What an essay, Becca. And it really comes down to all of a sudden, it's a drone world. How behind is America in drone warfare? Like what we saw with Russia in Ukraine overnight.

[Karen Moskva]

The United States is massively behind. And part of that is because the US Military is not learning the right lessons from Ukraine's war against Russia and its drone war. The US has been slow to adopt drones into its arsenal and hasn't been focused on trying to procure or produce them at the sheer number that you would need. So say, for instance, if you were able to try and, you know, have some type of offensive operation, you would need hundreds, if not thousands for a single operation. And the US Isn't ramping up production of those drones at the level that they would need to to have stockpiles that are sufficient to carry out some of the operational concepts that the US Military has trained to do.

[Tom Keene]

Paul Sweeney Hastings, quoting Richard Kipling of 1880 Arithmetic on the front frontier, a scrimmage in some border station, a canter down some dark defile, 2,000 pounds of education drops to a 10 rupee jaziel. The squadrons boast the Kramer's pride shot like a rabbit in a ride. Nothing's changed since 1880.

[Paul Sweeney]

So, Becca, what does the US military say in response to kind of their drone strategy policy? Because it seems like Ukraine, just for want, is kind of writing the rulebook here.

[Karen Moskva]

Yeah. And the US Is trying, right? There are a lot of there's a lot of experimentation. There's exercises where you see, you know, army units in particular trying to operate some of these drones in new ways and trying to frankly jailbreak some of their existing drones or AI systems to make them play together and do the things that they want. But this is where some of the longstanding efforts to kind of have these either rigid procurement processes have slowed down the integration of drones into the military or the Ways in which, frankly, the US Military just hasn't fielded enough drones, enough of those cheap, low cost drones that are attritable in nature where you don't necessarily mind if they end up destroyed on the battlefield, because that is their intent. The US hasn't had to fight like that. And so it's a wholesale shift in operational concepts, in training and not just in equipment.

[Public.com Advertiser]

Yep.

[Paul Sweeney]

Also this week, Becca, big, big week for Naito. President Trump heads over to Turkey for the Naito summit. What kind of expectations are there for this meeting?

[Karen Moskva]

I think the stakes are quite high from the perspective of Europe and that's because, you know, with all eyes on the the NATO summit, they're trying to hope that they can stave off some of the worst from happening. The European countries are hoping that an increase in defense spend, continued commitment to buy American equipment, continued efforts to try and fill some of the capability gaps that have been left, reduced U.S. commitments to NATO, that that will keep President Trump at bay and keep him from doing further cuts to US Forces in Europe, try and keep him from continuing to have designs after Greenland, and also try and cajole him into greater support for Ukraine, which after some devastating attacks last night, it's very clear that they are pretty much out of air defense.

[Tom Keene]

I mean, you're the pro on his back upon. I are just sitting here taking in the news, collating it. I'm seeing under Poland. Poland says the United States of America to resume troops rotation in the country. Is this just some bluff to get through the next two years of Trump? I mean, I get all the body language in that. Paul, thanks for bringing up Naito. I get the body language, but does it mean anything is time ticks on and they try to go back to the relationship we've always had.

[Karen Moskva]

I think Poland's a really unique case because essentially there was a US Troop rotation that was supposed to go to Poland that was halted after it was halted, which was a Pentagon decision. President Trump actually walked that back and said that further cuts in Europe are actually going to probably see more forces shifted to Poland, which has ramped up its defense spending massively and has bought millions upon millions worth of US Military equipment. So in many respects, Poland is in Trump's view, a quote, unquote, model ally where they are continuing to spend and put money back into the US Economy. And for that, they are essentially being rewarded for those efforts. So I'm not surprised to see that, yes, you know, some of these shifts are happening and that Poland is very much back on the agenda. But I think that's very unique to Poland and again, won't be the experience of other countries like Spain and those who essentially restricted U.S. access to military bases to prosecute the Iran war.

[Paul Sweeney]

President Trump is going to meet with Mr. Zelensky in Turkey. Do we expect anything meaningful to come out of there? It just feels like we're in this just long term quagmire in Ukraine.

[Karen Moskva]

I think that's exactly right, Paul. I think we're going to see a continued holding pattern there. I expect expect President Zelensky is going to ask for more Patriot missiles in part to protect Kiev and other key areas within Ukraine that have been under heavy bombardment from Russian drones and missiles. But I also think that Kiev is going to double down on their willingness to hold talks with Russia, noting the fact that it was President Putin who actually rejected the last, you know, extension of an invitation for talk.

[Tom Keene]

I got to get this, and this is just to try to keep up with Becca Wasser or Paul and I go down in flames every time. Drone development. California, California and Mississippi, Missouri, California and Virginia, California and Georgia, Ohio, California. Then the Stennis Space center, the Creech Air Force Base in Fort Moore, formerly Fort Benning. Becka Wasser, are we building drones like we used to build destroyers in World War II? Just spread it out across America?

[Karen Moskva]

Not quite yet, but that's what we hope to do. So essentially they're trying to spread out all of this across America to make sure that it impacts local economies but also takes advantage of local workforces. One of the things that we've seen, for example, in, you know, shipbuilding, since you mentioned it, Tom, is that it is heavily concentrated in just a few areas. Newport News, Virginia, up in, you know, up in Groton, Connecticut. And that means that those workforces are heavily taxed and there's not enough workers to go around and they can't recruit more. So by spreading out drone factories, which don't need to be on the coast and have a little bit more flexibility, they're hoping to tap into more workforce. They're hoping to try and help American jobs and economies and they're trying to do what they can to build distribute throughout the country.

[Tom Keene]

Are you publishing today, Becca? Can you give me a heads up on, you know, my required reading publishing today?

[Karen Moskva]

Well, your required reading is going to be my NATO summit preview, which is about Trump talks and tomahawks.

[Tom Keene]

They're all very poetic.

[Paul Sweeney]

Nice tease.

[Tom Keene]

You know, folks, where else are you going to have quoted Richard Kipling in the fame poetry? Oh, Becca Wasser, it's too much. Becca, thank you so much.

[Bloomberg Surveillance Host]

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.