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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy, plus global business, finance and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio.
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Speaker 2: It Well, as I mentioned, we want to go all in on not just the consumer in this economy, but also the latest with how people are viewing that probe into the Federal Reserve. I want to bring in a name that's absolutely familiar to our audience.
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Speaker 3: Heather Long.
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Speaker 2: She's chief economist at Navy Federal Credit Union. She spent years at the Washington Post, and before that she was at CNN. She's watched the Federal Reserve for many, many years. And Heather, we had booked you a long time ago, before we knew what would happen, Before we know what would happened over the weekend with the Federal Reserve. I just want to get your reaction to what many consider an unprecedented move on the Fed's independence.
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Speaker 4: Yeah, it was really something to see last night that video from the FED from FED Chair Pal coming out so strongly. He's known as mister Congeniality in Washington, d C. He always has been striking a very diplomatic tone, but last night the gloves came off and he really pushed back strongly. This was the breaking point for FED Chair Pal and his congeniality in Washington. You know, I think a couple of things really stand out to me going forward. Number one has been the strong reaction as you all were talking about earlier from some Republicans, not just Tom Tillis, but also Senator Murkowski from Alaska, you know, both of those senators from the GOP saying that they would block they would block any FED chair nominee from President Trump until this issue is resolved in the criminal probe or criminal allegations are pulled back against FED Chair Pale. I thought that was really striking to me. And the other thing I think people really forget in the FED debate is the fo MC technically elects its own chair each year. So there is a hypothetical world where even if President Trump gets his own nominee through the process and the Senate, it is possible that FED Chair Pale could stay on as a FED governor after his term expires May fifteenth, and even still be elected chair or some other leadership role of the FOMCI.
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Speaker 2: So does this do you think this probe makes it more likely he'd stay on because he wants to be the FED send this signal to markets that hey, I'm not going anywhere. The FED is going to remain independent. I'm going to stay.
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Speaker 4: Put, definitely, And I think in one of the things that struck me. I've covered FED Chair Pal since his first day. I used to be one of the FED reporters in the room there and meeting with him regularly. And one of the things that's always stood out to me from my very first one on one meeting with FED Chairpal is how much of an institutionalist he is. He's spoken openly about his admiration for Paul Voker and what he did. Part of the reason he undertook FED Chairpal undertook this massive renovation of the Echos building is because he really believed that he wanted to literally leave the FED, the building of the FED, and all the people in the FED and the institution of the FED better off when he stepped down his FED chair and so I think you're right. If he feels that the FED is in its independence is truly under threat, he will stay on and he will try to play that key role. Well.
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Speaker 5: I think reflecting on Jerome Powell's tenure as the FED chair is a good segue to talk about your views on how the economy is looking right now. We hear this term K shaped economy all the time from your role. Now is that an accurate portrayal of the real state of the economy in the US?
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Speaker 4: Yeah, Emily, thanks for asking.
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Speaker 6: So.
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Speaker 4: I believe I was the first person to coin the return of the K shape economy last summer. I wrote about it in a Washington Post column in early August, did the Moody's Inside Economics podcast, among others, and the term really took off after some of those appearances I made. And look, I believe we are in a K shape economy. And the reason that I say that so confidently is not just the Moody's data that many people have cited, but we have fifteen million members here at Navy Federal Credit Union, most of whom are in the middle class, and we can see it in our credit card data. It is literally two different worlds going on in our credit card data. I mean, maybe three, but three is a much harder thing to put a letter on. Maybe E just doesn't feel right. But look, basically, the new fiding line in America is around one hundred and seventy thousand dollars and that's the top twenty percent families who earn a household income above that. Those people we can see in our data, and they continue to grow. They're spending every month six or seven percent. They're spending heavily on discretionary and travel. Then there's kind of the middle class, let's say the kind of eighty to one hundred and twenty thousand dollars consumer. Those people it's flat to a little bit up. It depends on the month. It was kind of the Costco Christmas for the middle class. We saw a huge jump in people shopping at Costco, Sam's Club, TJ Max. We're talking double digit growth and spending in the holiday season at those type of value in discount stores. And then there's the bottom of the k you know, folks who are sort of sixty five thousand dollars in below, and I kid do not a number of those people we can see in our data, are actually spending less, not just less than in twenty twenty four, but in some cases less in inflation adjusted terms than they were spending in twenty ninth.
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Speaker 2: So, Heather, we only have about thirty seconds left and then we're going to get you back on soon. But is any of that data indicating to you that there could be a recession on the horizon.
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Speaker 4: I don't think so, not immediately, but I think there's going to be ongoing anngst. The k shape economy isn't going away anytime soon, and I believe we're in a jobless boom right now, and that continues to aggravate the frustration on main street as well. People are not getting the wage increases that they want and are used to the past several years, let alone being able to get another job. So put all that together and it's a rough winter for the middle class.
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Speaker 2: Heather Long appreciate you joining us. Heather is chief economist for Navy Federal Credit Union. Stay with us. More from Bloomberg Business Week Daily coming up after this.
00:06:58
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five e's during listen on Applecarplay and Android Atto with the Bloomberg Business app, or watch us live on YouTube.
00:07:12
Speaker 2: All right, everybody, TikTok, as Carol Massers says. When we get close to eighteen minutes till the end of trading, TikTok. Taking a look at the S and P five pound. We just heard an update from Charlie Pellad and Bill Maloney. We're off for best levels of the day. The S and P down up rather close to two tenths of one percent, the nastac Can positive four tenths of one percent, the Dow hired by one tenth of one percent. I want to bring in Aaron Kennedy's co founder and CEO of Clear Harbor Asset Management. The firm manages just under two billion dollars. I haven't spoken to him in a few months. He joins us once again from Stamford, Connecticut. Aaron, you know, you always send us some great notes ahead of time. But one thing that maybe not was on radar for a lot of people was the continued attacks on FED chair Jay Powell. It seemed like that had been kind of pulled back a little bit, and then late yesterday we hear reading the New York times, and then just minutes later we see that video from FED chair J Powell. What do you make of this unprecedented move, not just from Powell but also from the Department of Justice.
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Speaker 6: Yeah, it certainly wasn't on our Bengo card twenty four hours ago. And it's a sad moment. And I think, you know, the criminal investigation that potentially could ensue right now, it's a deep Department of Justice subpoena. I guess for what reason. Because he's cut rates, but he hasn't done it quickly enough. Let's not forget Powell cut rates one hundred basis points in twenty twenty four, seventy five basis points in twenty twenty five. And it seems like there's quite a bit of consensus around the table on Poll's side that, you know, maybe the economic data is strong enough which President Trump should cheer to possibly put the FED on hold here for a little while until we see either you know, growth running very strong or inflation becoming problematic. So really shooting the administration in the foot, and really their objective going into the midterms, I think is to prove that the economy is in great shape, which has been trending as such, and I think will potentially be the case in twenty twenty six. But this doesn't help, you know, having these sort of coercive tactives, tactics to try to sort of nudge the independence of the Central bank is just an anathema to I think objective observers.
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Speaker 2: So we're getting sort of the you know, the quick reaction from the banks and from the analysts right now about what this could actually do to markets. PGM out and Pimco saying that there's a risk that the fight that President Trump is having with the FED will drive rates higher. JP Morgan's trading desk is quote cautious on US stocks after the FED probe. After this FED probe, where do you stand?
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Speaker 6: Yeah, I think it's interesting. What has the market done since since we've opened today? Market opened up down and has rallied. Why is it rallied? It seems like it's rallied because Secretary of Treasury Vesson wasn't even aware that the Department of Justice was going to take this sort of action and has gone to the president, according to Axios and and and indicated that this was really not helpful to the cause, to the cause of growing our economy to messaging appropriately to the country now and all the way into the midterm elections, and so the market is rallied. So that's helpful. Maybe the President backs off, maybe there's an off ramp for sure, but I tend to agree with it. I think you said it was PGIM and PIMCO that this could become problematic if if, if these types of actions seem to be, you know, more more common over the next several months. I mean, look at last week we had this sort of cap on on on announcement from the President. They wanted to cap interest rates on credit cards. Well, that all sounds fine and danny, except who's going to be the most harm by that The actual credit card user who can't pay their monthly credit card bill. And that's the problem. The banks will remove those lines of credit, they'll cancel their credit cards. I pay my bill every month, I won't have a problem. So he's trying to address the key shape challenge in the economy. Thirty eight percent of Americans who don't own stocks but have a lot of credit card debt will be the most harmed by this. So again, very counterproductive.
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Speaker 5: The noise the headlines when it comes to FED independence and potentially political pressures on the federal reserve. How do you position your client portfolios based off that? Do you buy gold as a hedge? Do you sell your US equities?
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Speaker 6: We're trying to think, Katie about the long run, but we're also right from the start with our relationship with our client, we're trying to understand what's the client's own sort of emotional risk tolerance. How much volatility in their mind can they withstand not just can they afford to lose, but can they withstand serve what we refer to as the sleep well at night factor, and creating a portfolio around that. So your question about those asset classes that maybe mitigate some of the volatility that could ensue within the equity market. Yes, gold is actually an acid class that we've been touting. I've written about it for quarters. Tim's probably received it in my notes over the last many years. It's something that we've believed in. You know, it's a response to a lot of different things. You know, one is the declining confidence in our fiat currency system generally at global level, and the other one is sort of this diversification of foreign bank central bank reserves away from the dollar and even the Europe and that was really accelerated after Russia's invasion of Ukraine when we shut off dollar access in euro access to Russia. So countries like China sort of said, well, when we do trading with developed nations that do not like us so much, instead of buying euro denominated or dollar denominated fixed income, we're going to go buy gold. And you can see that farm reserves at the central bank level over the last five years have risen from a six percent waiting to a twenty one percent waiting. And so we still think there's a place for gold and portfolios for our clients.
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Speaker 2: Hey, Aaron, I want to switch gears a little because we're getting some breaking news. Cities set to eliminate about one thousand jobs this week in a cost cut push on looking at plant its shares of city. It was down earlier in the session. It's just still down three percent. So stock not moving much on that headline, actually moving just a little bit higher on that headline on meta platforms. Also the New York Times reporting that it will cut around ten percent of Reality Labs unit staff. The job cuts that we're seeing, look, this is these are anecdotal right now at this point, but they're still numbers. It's still data. How do you view the labor market right now and the connection with the consumer, because the can sumer certainly powers this economy.
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Speaker 6: Yeah, I think the labor market is reasonably strong. We saw that in the late the non farm payrolls data on Friday, We saw that in a Jolts data last week. A lot of anecdotal evidence is that it's reasonably strong. I think we have to be really careful and we look at a fifty thousand per month print like we saw on Friday with non farm payrolls, Historically that number of the last couple of years have been more like one hundred and fifty thousand or two hundred thousand. But if you look at our net immigration numbers in this country and you annual analyze, annualize the last let's say six months under the new sort of Trump immigration regime, it speaks to the reality that a one hundred and fifty to two hundred thousand per month net job growth of two for twenty twenty four or twenty twenty three, it's probably closer to like thirty thousand or forty thousand, and we printed fifty, so I think those numbers are okay. Again, Yeah, why shoot? Why shoot the economy in the foot with cities.
00:14:59
Speaker 2: Gotta run unfortunately against the clock. Aaron Cannon of Clear Harbor Asset Management. Stay with us more from Bloomberg Business Week Daily coming up after this.
00:15:12
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us Live on YouTube.
00:15:25
Speaker 2: I'm guessing Paige Smith at a special evening, but it was not with some friends, unless you consider her sources at these consumer finance companies her friends Page Smith is consumer finance reporter for Bloomberg News. The reason I'm saying Friday night is because Friday night was when we got the news that the president out on social media with the statement he wants to cap credit card interest rates at ten percent. My first question that I had, Can he do that?
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Speaker 7: That is a great question, and I think that first of all, just to back up for a second, this has been sort of a very chaotic weekend, I would say, and into Monday morning, there are a lot of unanswered questquestions of what exactly the President can and cannot do around this statement. I will say so the initial statement that the President would like to cap credit card interest rates at ten percent went out on Friday, and then the President again reiterated that stance on Sunday evening on Air Force One. So it was a sort of doubling down on his statement, and it's unclear the legal levers that.
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Speaker 8: He can pull.
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Speaker 2: He wrote on true Social Affordability Effect of January twentieth, twenty twenty six, I President of the United States calling for a one year cap on credit card interest rates of ten percent. We're looking at what this is the first day where markets have been opened after that statement at edict from the President. JP Morgan Chase down one point eight percent right now. Capital One Financial off its worse levels of the day, but it's still down about six point seven percent. City Group down about three point two percent. Capital One is the one that could be most affected by something like this.
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Speaker 7: So it's important to note that a number of major Wall Street banks are credit card issuers, and Capital One is the largest credit card issuer by loan volume in the US. But you know, JP Morgan is vastly impacted by this, or could be impacted by this American Express. You know, if you think of any sort of bank that has a major credit card portfolio, right, and those are the folks who would be hit the hardest if implemented again early days. We need to see in a substance in proposal, which we have not seen yet.
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Speaker 5: Okay, so I'm sorry that you had to work this weekend, but you've done some great reporting. I have to say, my initial instinct when I saw this news, you know, capping interest rates at ten percent, was oh, maybe that would be good for the end consumer. But your reporting shows that that's it's not exactly that clearcut.
00:17:50
Speaker 8: Certainly it's not that clear cut.
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Speaker 7: And I would say what we have reported on so far is that a number of analysts are actually pointing out that this really could in less credit being available to US consumers, because if you think about it, if the economics don't work, then you know, these are banks, they're very focused on their bottom lines. It would make sense for them to essentially pull back on credit that would be available to US consumers.
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Speaker 5: And you know, there was a note from UBS that I noticed. They said it would take an Act of Congress for such ratecaps to be in place. In summary, they said that they believe that these caps are unlikely to be implemented. What's come up so far about what Congress would be able to do, if anything.
00:18:34
Speaker 7: So what we know so far is that there have been a number of bills proposed over the years. More recently, there was a bill proposed by Senators Josh Holly and Bernie.
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Speaker 8: Sanders, which is quite interesting.
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Speaker 7: You know, you kind of think of the political spectrum there and they've come together to sort of agree on this one individual idea. But we will have to see again. That also makes for a very interesting negotiation on Capitol Hill and also at the White House of this mix of you know, folks who maybe, shall I say, are not often in the same room.
00:19:08
Speaker 2: You know, I think a consumer would would hear a conversation. They'd say, Okay, I understand that banks have to have the capital in order to extend credit to customers, but does it have to be twenty nine percent? Could it be twenty percent, fifteen percent, could it be ten percent? And yes, the banks would be less profitable, but they would still extend credit and that would still be part of their business.
00:19:31
Speaker 8: I think that's an open question.
00:19:33
Speaker 7: I would I will be the first one to say that I am not a bank CFO and I don't make these decisions, but I think a substantive proposal would have to be seen before any sort of CFO would have those discussions. And just to kind of ask the question of how low could you go right for an credit card interest rate? And if you look at credit cards currently, like there's not a blanket interest rate across the board. There are a lot of different options for different consumers, depending on your FIGHO score, depending on perhaps how long you've had a.
00:20:04
Speaker 8: Relationship with the bank.
00:20:06
Speaker 7: There are a lot of different factors that go into a credit card interest rate. So unsure of exactly if there is sort of a number where banks will dip to or if a lot of there's.
00:20:17
Speaker 8: A lot of uncertainty. Yes of Now, I would.
00:20:19
Speaker 5: Say, what do the consumer advocacy groups say about this? Is this something that they've been calling for over the years.
00:20:27
Speaker 7: So so far we have seen a number of statements come out. I would say the bank lobbying groups have kind of took an interestingly measured tone where they kind of spoke to sort of some of the consumer pain. I suppose that has been felt by us, you know, folks across the US, where I think it's easy to say that it's expensive to be its expensive right now for a number of different on a number of different fronts. And I think that the bank lobbying group sort of took the measured tone and acknowledged how expensive it is and said that there, you know, again, there's my to be seen. But that's the approach they've taken.
00:21:03
Speaker 8: Okay.
00:21:03
Speaker 5: I also want to ask about buy now, pay later, because at the bottom of your article you do mention that they could be a winner. We're talking about the Klarnas of the world, the affirms where again the consumer can buy something but they actually don't have to pay.
00:21:19
Speaker 8: The bill until a little bit later on.
00:21:21
Speaker 7: Yeah, So it's I would say that over you know, over the past weekend or since that initial announcement was made on Friday, it's been really interesting to kind of see the folks who have emerged in what opportunities have been identified as alternatives as supposed your credit cards. So we saw a statement earlier from the SOFI CEO Anthony Noto, for example, saying I believe the quote was giddy up in reference to Actually, it's important to note as well that SOFI does actually have a credit card, but the firm is best known for its student loan financing and also for its personal loans. So that was sort of the stance that Anthony Knoa was taking, is like, yes, this could be an opportunity, but again we also could see opportunity amongst the buy now, pay later.
00:22:07
Speaker 2: Firms when it comes to consumer behavior. When we think about people who use credit cards and carry balances, what can you tell us about that behavior and the people who pay off credit cards each month and don't necessarily create a lot of profits for these banks, although we should know interchange fees, yes, are a source of revenue for them, But what does that look like is that the minority of people are paying off their well credit cards.
00:22:33
Speaker 7: So not to go tunerdy into the payments leaning game for a minute, but so there are kind of two interesting and quite distinct groups that credit card companies are aware of, called like the revolvers and the transactors. So if you're a transactor, you're sort of that group that you are just describing tim where you know you use a you know, use your credit card, essentially for the lovely rewards that are available to you. Maybe you have a credit card with a fee, maybe it has no fee, but it is tied to an air line or something along those lines. And you know you pay off your credit card bill and full each month, and it's not as if you carry a balance, and you know you're not making the bank.
00:23:09
Speaker 8: A whole heck of a lot of money when you do that.
00:23:10
Speaker 7: But who is making the bank a lot of money or the revolvers. So this group of people who essentially you know, certainly may take advantage of some of those rewards programs and sign up for credit cards for those reasons, but do carry a balance from month to month and are accruing those fees and the accruing those accruing them in truest if you will, for the bank. But yes, interchange fee or sort of the money that banks get and all the other parties get actually for tapping, swiping and using your card at checkout, those are also major revenue drivers for banks.
00:23:47
Speaker 2: So net, based on the sources you spoke to, the analysts you spoke to, real risk for these companies.
00:23:53
Speaker 7: Or not, I would say that people are taking this very seriously, especially after the President doubled on his statements on Air Force One on Sunday evening last night.
00:24:04
Speaker 2: I mean, look, I think everybody has to understand, and we're going to talk to politics of this a little later in the program. That the president is in a midterm year. There's a push for affordability. We heard that from Bill Poulty on surveillance this morning. Just wait for Davos next week when we hear from the President about what he is going to do when it comes to affordability. So I would imagine, Emily that all the CEOs right now are thinking, Okay, wait a second, what is the President going to say about my industry when it comes to affordability.
00:24:31
Speaker 5: That's right, Page Smith, Consumer Finance Reporter. You're sticking with us, But thank you for all of that reporting today.
00:24:39
Speaker 2: Stay with us. More from Bloomberg Business Week Daily coming up after this.
00:24:47
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
00:25:01
Speaker 2: Meantime, I want to switch gears a little bit and go global, right now because I don't know if you've seen the footage coming from Iran, but it's been very powerful. The Foreign minister saying security forces have quote full control of the country after two weeks of violent unrest. This amit reports that he's reached out to the US following an intervention threat by President Donald Trump. I want to bring in Nick Watdams. He's Bloomberg News National Security Team leader. He joins us from the Bloomberg Washington DC Bureau. Nick, it's sometimes difficult to sometimes a challenge to get a full picture of what's actually happening on the ground in Iran. What can you tell us about what you know?
00:25:35
Speaker 9: Well, I mean clearly, in cases like this, when you have a lot of difficulty getting real insight into what's happening on the ground, you judge it based on what the response is from the leadership, and their response so far saying essentially they're going to crush these protests makes clear that they take it very, very seriously. So you know, on the US side, there is a lot of anticipation and hope, particularly among the Trump administration, that this could assent amount to the downfall of the regime. On the other hand, you got to say, wait a minute here. You know, this is a government that has managed to stay in power for many, many years, surviving massive squeeze by the United States war with Iraq back in the nineteen eighties, recent campaign and military strikes by the Trump administration, and the succession of protests over the years. So gauging whether this actually means the regime is going to be toppled, you know.
00:26:28
Speaker 3: That's a big if.
00:26:29
Speaker 9: Of course, The question is, you know, these things can happen very slowly and then suddenly happened very quickly. So I think that's what the Trump administration is certainly counting on and perhaps even indicating that they might be trying to give it a little bit of a push as well.
00:26:42
Speaker 5: I'm curious, when you observe what's going on in the ground in Iran, is there anything that distinguishes this moment from previous protest waves that we have seen in the country.
00:26:54
Speaker 9: Well, I mean, so you've had protests in the country in the past that were large, but nothing on this scale and so sustained. So seeing this number of people out in the streets for this long is something that's really new. And again, when you see that response from the regime. It makes clear how seriously they take it and how much of a threat they see it. As you also had this footage of the president walking on the street, and he has certainly tried to navigate thread the needle, as it were, between responding to the demands of the protesters but also staying ultimately answerable to the Ietolas. So it certainly seems far more precarious than past protests, which it never seemed to extend quite so deeply.
00:27:42
Speaker 2: Nick, Is anyone seriously thinking that this could be a turning point for the country and the country's leadership, especially following last year's US bombing of Iran's nuclear facilities. Could this be a turning point where Iran could be a democracy again?
00:27:57
Speaker 9: Well, you know, there's be a long way to go before it was a functioning democracy. I think, you know that given that the systems that Iran has not really had a democratic system since, you know, even long before the.
00:28:13
Speaker 3: The Itola came to power.
00:28:14
Speaker 9: So you know, the idea that we would see is sort of fully functioning democracy I think is not really something that's being counted on anytime soon, but certainly there is there is a belief that we are in uncharted territory here, and you know, the big question is what exactly is the role played by the United States. How much of these protests are just people really tired both of the regime but also the economic isolation that this country has been under for so many years and the financial hardship they've been forced to face because of that sanctions regime. In some ways, it feels like people on the street are just simply fed up and don't want to.
00:28:51
Speaker 3: Take it anymore.
00:28:51
Speaker 9: Of course, what the result is now functioning democracy or just a deeper chaos. I mean, that's that's going to be a question that the only time will tell.
00:29:00
Speaker 5: Umberg News reporting showing that Trump says US is mulling Iran options, talk about what specifically those options would be.
00:29:10
Speaker 3: What does that actually mean, right?
00:29:12
Speaker 9: I mean, so you had the White House spokeswoman Caroline Levitt saying military force is always an option, but the US would prefer democracy, diplomacy, excuse me. And there have been some indications that Presidential Envoy Steve Witkoff is talking to the Foreign minister there, so it does appear that there is some sort of diplomacy happening behind the scenes. I mean, It's not really clear how the US using military force could help the protesters. I guess if they did targeted strikes against the regime in some way.
00:29:39
Speaker 3: But what you really see here is the.
00:29:41
Speaker 9: Muscle flexing by Donald Trump after the ouster of President Nicholas Maduro in Venezuela, the previous Iran strikes, strikes in Nigeria, Syria, Yemen. I mean, this is a president who is willing to push the bounds of his authority and his power to extreme ends and ends that have not really been in many, many years.
00:30:01
Speaker 3: So how that could change things in Iran very unknown.
00:30:05
Speaker 9: But you can be certain that now, unlike in the past after the Maduro raid, for example, the regime in Iran is really standing up and taking notice about that threat.
00:30:16
Speaker 3: Nick.
00:30:16
Speaker 2: Where is Israel in all of this?
00:30:20
Speaker 9: I think Israel would be very much a willing participant in any action that the US Tate would take. I mean, Israel has argued that it's under the cloud of a potentially catastrophic strike from Iran should Iran develop a nuclear weapons, so they would like to do anything they can to see the regime.
00:30:39
Speaker 3: There ushered from power. The question, of course, though, is what happens next.
00:30:43
Speaker 9: I mean, there's a lot of euphoria and anticipation about toppling some of these regimes, But then you look at a country like Afghanistan or certainly Iraq after the invasion in two thousand and three, the result what happens in the years and decades to come is entirely unpredictable. So it's hard to see for Israel how a successor regime in Iran could be any worse.
00:31:04
Speaker 3: But of course it's happened before.
00:31:06
Speaker 2: Is there any indication that the US has infrastructure in place for some sort of operation, Like you know, if we look at the leading up to Maduro and what happened in Venezuela, there was so much infrastructure being put into that part of the world. Is it shifting.
00:31:23
Speaker 9: Well, we have not seen the US shift assets out of the Caribbean Sea, at least as far as we know, and they've certainly made no public announcements. But you know, the administration at this point, the US military has so many.
00:31:34
Speaker 3: Assets at its disposal.
00:31:35
Speaker 9: Of course, the big question there is what would a US strike look like. I mean, when you had those Iran strikes earlier last year, the US was flying bombers from an air base in the United States, along with jets that were stationed in the region. So there's a question of, you know, what the scope of that US operation would be and whether they would really need to shift a serious number of assets. They're given that they could have bombers refueled en route and then attack and then return to base.
00:32:06
Speaker 2: Yeah, like we saw last year. Nick Wadams, national Security team leader for Bloomberg News, joining us from Washington.
00:32:12
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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy, plus global business, finance and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio.
00:00:32
Speaker 2: It Well, as I mentioned, we want to go all in on not just the consumer in this economy, but also the latest with how people are viewing that probe into the Federal Reserve. I want to bring in a name that's absolutely familiar to our audience.
00:00:45
Speaker 3: Heather Long.
00:00:46
Speaker 2: She's chief economist at Navy Federal Credit Union. She spent years at the Washington Post, and before that she was at CNN. She's watched the Federal Reserve for many, many years. And Heather, we had booked you a long time ago, before we knew what would happen, Before we know what would happened over the weekend with the Federal Reserve. I just want to get your reaction to what many consider an unprecedented move on the Fed's independence.
00:01:08
Speaker 4: Yeah, it was really something to see last night that video from the FED from FED Chair Pal coming out so strongly. He's known as mister Congeniality in Washington, d C. He always has been striking a very diplomatic tone, but last night the gloves came off and he really pushed back strongly. This was the breaking point for FED Chair Pal and his congeniality in Washington. You know, I think a couple of things really stand out to me going forward. Number one has been the strong reaction as you all were talking about earlier from some Republicans, not just Tom Tillis, but also Senator Murkowski from Alaska, you know, both of those senators from the GOP saying that they would block they would block any FED chair nominee from President Trump until this issue is resolved in the criminal probe or criminal allegations are pulled back against FED Chair Pale. I thought that was really striking to me. And the other thing I think people really forget in the FED debate is the fo MC technically elects its own chair each year. So there is a hypothetical world where even if President Trump gets his own nominee through the process and the Senate, it is possible that FED Chair Pale could stay on as a FED governor after his term expires May fifteenth, and even still be elected chair or some other leadership role of the FOMCI.
00:02:41
Speaker 2: So does this do you think this probe makes it more likely he'd stay on because he wants to be the FED send this signal to markets that hey, I'm not going anywhere. The FED is going to remain independent. I'm going to stay.
00:02:52
Speaker 4: Put, definitely, And I think in one of the things that struck me. I've covered FED Chair Pal since his first day. I used to be one of the FED reporters in the room there and meeting with him regularly. And one of the things that's always stood out to me from my very first one on one meeting with FED Chairpal is how much of an institutionalist he is. He's spoken openly about his admiration for Paul Voker and what he did. Part of the reason he undertook FED Chairpal undertook this massive renovation of the Echos building is because he really believed that he wanted to literally leave the FED, the building of the FED, and all the people in the FED and the institution of the FED better off when he stepped down his FED chair and so I think you're right. If he feels that the FED is in its independence is truly under threat, he will stay on and he will try to play that key role. Well.
00:03:49
Speaker 5: I think reflecting on Jerome Powell's tenure as the FED chair is a good segue to talk about your views on how the economy is looking right now. We hear this term K shaped economy all the time from your role. Now is that an accurate portrayal of the real state of the economy in the US?
00:04:12
Speaker 4: Yeah, Emily, thanks for asking.
00:04:13
Speaker 6: So.
00:04:13
Speaker 4: I believe I was the first person to coin the return of the K shape economy last summer. I wrote about it in a Washington Post column in early August, did the Moody's Inside Economics podcast, among others, and the term really took off after some of those appearances I made. And look, I believe we are in a K shape economy. And the reason that I say that so confidently is not just the Moody's data that many people have cited, but we have fifteen million members here at Navy Federal Credit Union, most of whom are in the middle class, and we can see it in our credit card data. It is literally two different worlds going on in our credit card data. I mean, maybe three, but three is a much harder thing to put a letter on. Maybe E just doesn't feel right. But look, basically, the new fiding line in America is around one hundred and seventy thousand dollars and that's the top twenty percent families who earn a household income above that. Those people we can see in our data, and they continue to grow. They're spending every month six or seven percent. They're spending heavily on discretionary and travel. Then there's kind of the middle class, let's say the kind of eighty to one hundred and twenty thousand dollars consumer. Those people it's flat to a little bit up. It depends on the month. It was kind of the Costco Christmas for the middle class. We saw a huge jump in people shopping at Costco, Sam's Club, TJ Max. We're talking double digit growth and spending in the holiday season at those type of value in discount stores. And then there's the bottom of the k you know, folks who are sort of sixty five thousand dollars in below, and I kid do not a number of those people we can see in our data, are actually spending less, not just less than in twenty twenty four, but in some cases less in inflation adjusted terms than they were spending in twenty ninth.
00:06:04
Speaker 2: So, Heather, we only have about thirty seconds left and then we're going to get you back on soon. But is any of that data indicating to you that there could be a recession on the horizon.
00:06:13
Speaker 4: I don't think so, not immediately, but I think there's going to be ongoing anngst. The k shape economy isn't going away anytime soon, and I believe we're in a jobless boom right now, and that continues to aggravate the frustration on main street as well. People are not getting the wage increases that they want and are used to the past several years, let alone being able to get another job. So put all that together and it's a rough winter for the middle class.
00:06:42
Speaker 2: Heather Long appreciate you joining us. Heather is chief economist for Navy Federal Credit Union. Stay with us. More from Bloomberg Business Week Daily coming up after this.
00:06:58
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five e's during listen on Applecarplay and Android Atto with the Bloomberg Business app, or watch us live on YouTube.
00:07:12
Speaker 2: All right, everybody, TikTok, as Carol Massers says. When we get close to eighteen minutes till the end of trading, TikTok. Taking a look at the S and P five pound. We just heard an update from Charlie Pellad and Bill Maloney. We're off for best levels of the day. The S and P down up rather close to two tenths of one percent, the nastac Can positive four tenths of one percent, the Dow hired by one tenth of one percent. I want to bring in Aaron Kennedy's co founder and CEO of Clear Harbor Asset Management. The firm manages just under two billion dollars. I haven't spoken to him in a few months. He joins us once again from Stamford, Connecticut. Aaron, you know, you always send us some great notes ahead of time. But one thing that maybe not was on radar for a lot of people was the continued attacks on FED chair Jay Powell. It seemed like that had been kind of pulled back a little bit, and then late yesterday we hear reading the New York times, and then just minutes later we see that video from FED chair J Powell. What do you make of this unprecedented move, not just from Powell but also from the Department of Justice.
00:08:13
Speaker 6: Yeah, it certainly wasn't on our Bengo card twenty four hours ago. And it's a sad moment. And I think, you know, the criminal investigation that potentially could ensue right now, it's a deep Department of Justice subpoena. I guess for what reason. Because he's cut rates, but he hasn't done it quickly enough. Let's not forget Powell cut rates one hundred basis points in twenty twenty four, seventy five basis points in twenty twenty five. And it seems like there's quite a bit of consensus around the table on Poll's side that, you know, maybe the economic data is strong enough which President Trump should cheer to possibly put the FED on hold here for a little while until we see either you know, growth running very strong or inflation becoming problematic. So really shooting the administration in the foot, and really their objective going into the midterms, I think is to prove that the economy is in great shape, which has been trending as such, and I think will potentially be the case in twenty twenty six. But this doesn't help, you know, having these sort of coercive tactives, tactics to try to sort of nudge the independence of the Central bank is just an anathema to I think objective observers.
00:09:38
Speaker 2: So we're getting sort of the you know, the quick reaction from the banks and from the analysts right now about what this could actually do to markets. PGM out and Pimco saying that there's a risk that the fight that President Trump is having with the FED will drive rates higher. JP Morgan's trading desk is quote cautious on US stocks after the FED probe. After this FED probe, where do you stand?
00:10:00
Speaker 6: Yeah, I think it's interesting. What has the market done since since we've opened today? Market opened up down and has rallied. Why is it rallied? It seems like it's rallied because Secretary of Treasury Vesson wasn't even aware that the Department of Justice was going to take this sort of action and has gone to the president, according to Axios and and and indicated that this was really not helpful to the cause, to the cause of growing our economy to messaging appropriately to the country now and all the way into the midterm elections, and so the market is rallied. So that's helpful. Maybe the President backs off, maybe there's an off ramp for sure, but I tend to agree with it. I think you said it was PGIM and PIMCO that this could become problematic if if, if these types of actions seem to be, you know, more more common over the next several months. I mean, look at last week we had this sort of cap on on on announcement from the President. They wanted to cap interest rates on credit cards. Well, that all sounds fine and danny, except who's going to be the most harm by that The actual credit card user who can't pay their monthly credit card bill. And that's the problem. The banks will remove those lines of credit, they'll cancel their credit cards. I pay my bill every month, I won't have a problem. So he's trying to address the key shape challenge in the economy. Thirty eight percent of Americans who don't own stocks but have a lot of credit card debt will be the most harmed by this. So again, very counterproductive.
00:11:35
Speaker 5: The noise the headlines when it comes to FED independence and potentially political pressures on the federal reserve. How do you position your client portfolios based off that? Do you buy gold as a hedge? Do you sell your US equities?
00:11:53
Speaker 6: We're trying to think, Katie about the long run, but we're also right from the start with our relationship with our client, we're trying to understand what's the client's own sort of emotional risk tolerance. How much volatility in their mind can they withstand not just can they afford to lose, but can they withstand serve what we refer to as the sleep well at night factor, and creating a portfolio around that. So your question about those asset classes that maybe mitigate some of the volatility that could ensue within the equity market. Yes, gold is actually an acid class that we've been touting. I've written about it for quarters. Tim's probably received it in my notes over the last many years. It's something that we've believed in. You know, it's a response to a lot of different things. You know, one is the declining confidence in our fiat currency system generally at global level, and the other one is sort of this diversification of foreign bank central bank reserves away from the dollar and even the Europe and that was really accelerated after Russia's invasion of Ukraine when we shut off dollar access in euro access to Russia. So countries like China sort of said, well, when we do trading with developed nations that do not like us so much, instead of buying euro denominated or dollar denominated fixed income, we're going to go buy gold. And you can see that farm reserves at the central bank level over the last five years have risen from a six percent waiting to a twenty one percent waiting. And so we still think there's a place for gold and portfolios for our clients.
00:13:22
Speaker 2: Hey, Aaron, I want to switch gears a little because we're getting some breaking news. Cities set to eliminate about one thousand jobs this week in a cost cut push on looking at plant its shares of city. It was down earlier in the session. It's just still down three percent. So stock not moving much on that headline, actually moving just a little bit higher on that headline on meta platforms. Also the New York Times reporting that it will cut around ten percent of Reality Labs unit staff. The job cuts that we're seeing, look, this is these are anecdotal right now at this point, but they're still numbers. It's still data. How do you view the labor market right now and the connection with the consumer, because the can sumer certainly powers this economy.
00:14:02
Speaker 6: Yeah, I think the labor market is reasonably strong. We saw that in the late the non farm payrolls data on Friday, We saw that in a Jolts data last week. A lot of anecdotal evidence is that it's reasonably strong. I think we have to be really careful and we look at a fifty thousand per month print like we saw on Friday with non farm payrolls, Historically that number of the last couple of years have been more like one hundred and fifty thousand or two hundred thousand. But if you look at our net immigration numbers in this country and you annual analyze, annualize the last let's say six months under the new sort of Trump immigration regime, it speaks to the reality that a one hundred and fifty to two hundred thousand per month net job growth of two for twenty twenty four or twenty twenty three, it's probably closer to like thirty thousand or forty thousand, and we printed fifty, so I think those numbers are okay. Again, Yeah, why shoot? Why shoot the economy in the foot with cities.
00:14:59
Speaker 2: Gotta run unfortunately against the clock. Aaron Cannon of Clear Harbor Asset Management. Stay with us more from Bloomberg Business Week Daily coming up after this.
00:15:12
Speaker 1: You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us Live on YouTube.
00:15:25
Speaker 2: I'm guessing Paige Smith at a special evening, but it was not with some friends, unless you consider her sources at these consumer finance companies her friends Page Smith is consumer finance reporter for Bloomberg News. The reason I'm saying Friday night is because Friday night was when we got the news that the president out on social media with the statement he wants to cap credit card interest rates at ten percent. My first question that I had, Can he do that?
00:15:49
Speaker 7: That is a great question, and I think that first of all, just to back up for a second, this has been sort of a very chaotic weekend, I would say, and into Monday morning, there are a lot of unanswered questquestions of what exactly the President can and cannot do around this statement. I will say so the initial statement that the President would like to cap credit card interest rates at ten percent went out on Friday, and then the President again reiterated that stance on Sunday evening on Air Force One. So it was a sort of doubling down on his statement, and it's unclear the legal levers that.
00:16:25
Speaker 8: He can pull.
00:16:26
Speaker 2: He wrote on true Social Affordability Effect of January twentieth, twenty twenty six, I President of the United States calling for a one year cap on credit card interest rates of ten percent. We're looking at what this is the first day where markets have been opened after that statement at edict from the President. JP Morgan Chase down one point eight percent right now. Capital One Financial off its worse levels of the day, but it's still down about six point seven percent. City Group down about three point two percent. Capital One is the one that could be most affected by something like this.
00:16:59
Speaker 7: So it's important to note that a number of major Wall Street banks are credit card issuers, and Capital One is the largest credit card issuer by loan volume in the US. But you know, JP Morgan is vastly impacted by this, or could be impacted by this American Express. You know, if you think of any sort of bank that has a major credit card portfolio, right, and those are the folks who would be hit the hardest if implemented again early days. We need to see in a substance in proposal, which we have not seen yet.
00:17:32
Speaker 5: Okay, so I'm sorry that you had to work this weekend, but you've done some great reporting. I have to say, my initial instinct when I saw this news, you know, capping interest rates at ten percent, was oh, maybe that would be good for the end consumer. But your reporting shows that that's it's not exactly that clearcut.
00:17:50
Speaker 8: Certainly it's not that clear cut.
00:17:52
Speaker 7: And I would say what we have reported on so far is that a number of analysts are actually pointing out that this really could in less credit being available to US consumers, because if you think about it, if the economics don't work, then you know, these are banks, they're very focused on their bottom lines. It would make sense for them to essentially pull back on credit that would be available to US consumers.
00:18:16
Speaker 5: And you know, there was a note from UBS that I noticed. They said it would take an Act of Congress for such ratecaps to be in place. In summary, they said that they believe that these caps are unlikely to be implemented. What's come up so far about what Congress would be able to do, if anything.
00:18:34
Speaker 7: So what we know so far is that there have been a number of bills proposed over the years. More recently, there was a bill proposed by Senators Josh Holly and Bernie.
00:18:45
Speaker 8: Sanders, which is quite interesting.
00:18:47
Speaker 7: You know, you kind of think of the political spectrum there and they've come together to sort of agree on this one individual idea. But we will have to see again. That also makes for a very interesting negotiation on Capitol Hill and also at the White House of this mix of you know, folks who maybe, shall I say, are not often in the same room.
00:19:08
Speaker 2: You know, I think a consumer would would hear a conversation. They'd say, Okay, I understand that banks have to have the capital in order to extend credit to customers, but does it have to be twenty nine percent? Could it be twenty percent, fifteen percent, could it be ten percent? And yes, the banks would be less profitable, but they would still extend credit and that would still be part of their business.
00:19:31
Speaker 8: I think that's an open question.
00:19:33
Speaker 7: I would I will be the first one to say that I am not a bank CFO and I don't make these decisions, but I think a substantive proposal would have to be seen before any sort of CFO would have those discussions. And just to kind of ask the question of how low could you go right for an credit card interest rate? And if you look at credit cards currently, like there's not a blanket interest rate across the board. There are a lot of different options for different consumers, depending on your FIGHO score, depending on perhaps how long you've had a.
00:20:04
Speaker 8: Relationship with the bank.
00:20:06
Speaker 7: There are a lot of different factors that go into a credit card interest rate. So unsure of exactly if there is sort of a number where banks will dip to or if a lot of there's.
00:20:17
Speaker 8: A lot of uncertainty. Yes of Now, I would.
00:20:19
Speaker 5: Say, what do the consumer advocacy groups say about this? Is this something that they've been calling for over the years.
00:20:27
Speaker 7: So so far we have seen a number of statements come out. I would say the bank lobbying groups have kind of took an interestingly measured tone where they kind of spoke to sort of some of the consumer pain. I suppose that has been felt by us, you know, folks across the US, where I think it's easy to say that it's expensive to be its expensive right now for a number of different on a number of different fronts. And I think that the bank lobbying group sort of took the measured tone and acknowledged how expensive it is and said that there, you know, again, there's my to be seen. But that's the approach they've taken.
00:21:03
Speaker 8: Okay.
00:21:03
Speaker 5: I also want to ask about buy now, pay later, because at the bottom of your article you do mention that they could be a winner. We're talking about the Klarnas of the world, the affirms where again the consumer can buy something but they actually don't have to pay.
00:21:19
Speaker 8: The bill until a little bit later on.
00:21:21
Speaker 7: Yeah, So it's I would say that over you know, over the past weekend or since that initial announcement was made on Friday, it's been really interesting to kind of see the folks who have emerged in what opportunities have been identified as alternatives as supposed your credit cards. So we saw a statement earlier from the SOFI CEO Anthony Noto, for example, saying I believe the quote was giddy up in reference to Actually, it's important to note as well that SOFI does actually have a credit card, but the firm is best known for its student loan financing and also for its personal loans. So that was sort of the stance that Anthony Knoa was taking, is like, yes, this could be an opportunity, but again we also could see opportunity amongst the buy now, pay later.
00:22:07
Speaker 2: Firms when it comes to consumer behavior. When we think about people who use credit cards and carry balances, what can you tell us about that behavior and the people who pay off credit cards each month and don't necessarily create a lot of profits for these banks, although we should know interchange fees, yes, are a source of revenue for them, But what does that look like is that the minority of people are paying off their well credit cards.
00:22:33
Speaker 7: So not to go tunerdy into the payments leaning game for a minute, but so there are kind of two interesting and quite distinct groups that credit card companies are aware of, called like the revolvers and the transactors. So if you're a transactor, you're sort of that group that you are just describing tim where you know you use a you know, use your credit card, essentially for the lovely rewards that are available to you. Maybe you have a credit card with a fee, maybe it has no fee, but it is tied to an air line or something along those lines. And you know you pay off your credit card bill and full each month, and it's not as if you carry a balance, and you know you're not making the bank.
00:23:09
Speaker 8: A whole heck of a lot of money when you do that.
00:23:10
Speaker 7: But who is making the bank a lot of money or the revolvers. So this group of people who essentially you know, certainly may take advantage of some of those rewards programs and sign up for credit cards for those reasons, but do carry a balance from month to month and are accruing those fees and the accruing those accruing them in truest if you will, for the bank. But yes, interchange fee or sort of the money that banks get and all the other parties get actually for tapping, swiping and using your card at checkout, those are also major revenue drivers for banks.
00:23:47
Speaker 2: So net, based on the sources you spoke to, the analysts you spoke to, real risk for these companies.
00:23:53
Speaker 7: Or not, I would say that people are taking this very seriously, especially after the President doubled on his statements on Air Force One on Sunday evening last night.
00:24:04
Speaker 2: I mean, look, I think everybody has to understand, and we're going to talk to politics of this a little later in the program. That the president is in a midterm year. There's a push for affordability. We heard that from Bill Poulty on surveillance this morning. Just wait for Davos next week when we hear from the President about what he is going to do when it comes to affordability. So I would imagine, Emily that all the CEOs right now are thinking, Okay, wait a second, what is the President going to say about my industry when it comes to affordability.
00:24:31
Speaker 5: That's right, Page Smith, Consumer Finance Reporter. You're sticking with us, But thank you for all of that reporting today.
00:24:39
Speaker 2: Stay with us. More from Bloomberg Business Week Daily coming up after this.
00:24:47
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five e's during Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
00:25:01
Speaker 2: Meantime, I want to switch gears a little bit and go global, right now because I don't know if you've seen the footage coming from Iran, but it's been very powerful. The Foreign minister saying security forces have quote full control of the country after two weeks of violent unrest. This amit reports that he's reached out to the US following an intervention threat by President Donald Trump. I want to bring in Nick Watdams. He's Bloomberg News National Security Team leader. He joins us from the Bloomberg Washington DC Bureau. Nick, it's sometimes difficult to sometimes a challenge to get a full picture of what's actually happening on the ground in Iran. What can you tell us about what you know?
00:25:35
Speaker 9: Well, I mean clearly, in cases like this, when you have a lot of difficulty getting real insight into what's happening on the ground, you judge it based on what the response is from the leadership, and their response so far saying essentially they're going to crush these protests makes clear that they take it very, very seriously. So you know, on the US side, there is a lot of anticipation and hope, particularly among the Trump administration, that this could assent amount to the downfall of the regime. On the other hand, you got to say, wait a minute here. You know, this is a government that has managed to stay in power for many, many years, surviving massive squeeze by the United States war with Iraq back in the nineteen eighties, recent campaign and military strikes by the Trump administration, and the succession of protests over the years. So gauging whether this actually means the regime is going to be toppled, you know.
00:26:28
Speaker 3: That's a big if.
00:26:29
Speaker 9: Of course, The question is, you know, these things can happen very slowly and then suddenly happened very quickly. So I think that's what the Trump administration is certainly counting on and perhaps even indicating that they might be trying to give it a little bit of a push as well.
00:26:42
Speaker 5: I'm curious, when you observe what's going on in the ground in Iran, is there anything that distinguishes this moment from previous protest waves that we have seen in the country.
00:26:54
Speaker 9: Well, I mean, so you've had protests in the country in the past that were large, but nothing on this scale and so sustained. So seeing this number of people out in the streets for this long is something that's really new. And again, when you see that response from the regime. It makes clear how seriously they take it and how much of a threat they see it. As you also had this footage of the president walking on the street, and he has certainly tried to navigate thread the needle, as it were, between responding to the demands of the protesters but also staying ultimately answerable to the Ietolas. So it certainly seems far more precarious than past protests, which it never seemed to extend quite so deeply.
00:27:42
Speaker 2: Nick, Is anyone seriously thinking that this could be a turning point for the country and the country's leadership, especially following last year's US bombing of Iran's nuclear facilities. Could this be a turning point where Iran could be a democracy again?
00:27:57
Speaker 9: Well, you know, there's be a long way to go before it was a functioning democracy. I think, you know that given that the systems that Iran has not really had a democratic system since, you know, even long before the.
00:28:13
Speaker 3: The Itola came to power.
00:28:14
Speaker 9: So you know, the idea that we would see is sort of fully functioning democracy I think is not really something that's being counted on anytime soon, but certainly there is there is a belief that we are in uncharted territory here, and you know, the big question is what exactly is the role played by the United States. How much of these protests are just people really tired both of the regime but also the economic isolation that this country has been under for so many years and the financial hardship they've been forced to face because of that sanctions regime. In some ways, it feels like people on the street are just simply fed up and don't want to.
00:28:51
Speaker 3: Take it anymore.
00:28:51
Speaker 9: Of course, what the result is now functioning democracy or just a deeper chaos. I mean, that's that's going to be a question that the only time will tell.
00:29:00
Speaker 5: Umberg News reporting showing that Trump says US is mulling Iran options, talk about what specifically those options would be.
00:29:10
Speaker 3: What does that actually mean, right?
00:29:12
Speaker 9: I mean, so you had the White House spokeswoman Caroline Levitt saying military force is always an option, but the US would prefer democracy, diplomacy, excuse me. And there have been some indications that Presidential Envoy Steve Witkoff is talking to the Foreign minister there, so it does appear that there is some sort of diplomacy happening behind the scenes. I mean, It's not really clear how the US using military force could help the protesters. I guess if they did targeted strikes against the regime in some way.
00:29:39
Speaker 3: But what you really see here is the.
00:29:41
Speaker 9: Muscle flexing by Donald Trump after the ouster of President Nicholas Maduro in Venezuela, the previous Iran strikes, strikes in Nigeria, Syria, Yemen. I mean, this is a president who is willing to push the bounds of his authority and his power to extreme ends and ends that have not really been in many, many years.
00:30:01
Speaker 3: So how that could change things in Iran very unknown.
00:30:05
Speaker 9: But you can be certain that now, unlike in the past after the Maduro raid, for example, the regime in Iran is really standing up and taking notice about that threat.
00:30:16
Speaker 3: Nick.
00:30:16
Speaker 2: Where is Israel in all of this?
00:30:20
Speaker 9: I think Israel would be very much a willing participant in any action that the US Tate would take. I mean, Israel has argued that it's under the cloud of a potentially catastrophic strike from Iran should Iran develop a nuclear weapons, so they would like to do anything they can to see the regime.
00:30:39
Speaker 3: There ushered from power. The question, of course, though, is what happens next.
00:30:43
Speaker 9: I mean, there's a lot of euphoria and anticipation about toppling some of these regimes, But then you look at a country like Afghanistan or certainly Iraq after the invasion in two thousand and three, the result what happens in the years and decades to come is entirely unpredictable. So it's hard to see for Israel how a successor regime in Iran could be any worse.
00:31:04
Speaker 3: But of course it's happened before.
00:31:06
Speaker 2: Is there any indication that the US has infrastructure in place for some sort of operation, Like you know, if we look at the leading up to Maduro and what happened in Venezuela, there was so much infrastructure being put into that part of the world. Is it shifting.
00:31:23
Speaker 9: Well, we have not seen the US shift assets out of the Caribbean Sea, at least as far as we know, and they've certainly made no public announcements. But you know, the administration at this point, the US military has so many.
00:31:34
Speaker 3: Assets at its disposal.
00:31:35
Speaker 9: Of course, the big question there is what would a US strike look like. I mean, when you had those Iran strikes earlier last year, the US was flying bombers from an air base in the United States, along with jets that were stationed in the region. So there's a question of, you know, what the scope of that US operation would be and whether they would really need to shift a serious number of assets. They're given that they could have bombers refueled en route and then attack and then return to base.
00:32:06
Speaker 2: Yeah, like we saw last year. Nick Wadams, national Security team leader for Bloomberg News, joining us from Washington.
00:32:12
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