Trump Says Talks Are Iran’s ‘Last Chance’ After Threats

0:02Bloomberg 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 Stenevek on Bloomberg Radio. We have a great voice right in studio with us to kind of get to all things the president and the White House. With us is Bloomberg News White House and Washington correspondent Jeff Mason here in studio. In the meantime, we will monitor, of course, the president's comments and bring you anything of substance.

0:48Jeff, good to have you here with us. I do want to be with you. I guess it's I think, Farrah, you've been listening to this press conference. Anything of note here that you think we should bring attention to? A handful of things. Certainly first on Iran. He is suggesting that talks are going on, even though Iran says talks are not going on. And that just becomes a situation of who do you believe? And it's hard to answer that question. But my understanding is there are at least some sort of context going on. But who that is or who it's with seems to be up in the air. Do we even know where they are?

1:22Well, I'm not sure that they're physically, like that everyone is in one place. There are a couple intermediaries who have been part of this process from the get-go, Oman being one of them. And Iran recognized or acknowledged that Oman was, that they were in touch with Oman about this. But it's just hard. It's hard to know because the president says these things. And it's certainly very important to him to show that there's a pathway to peace because he doesn't want this to go on forever. But it's tricky. What is that pathway, though? Yeah. It's unclear to me. I wish he were here so that we could ask him.

2:05I mean, and to go back to just some of the things that he said just now. He said that the strait is going to open, the Strait of Hormuz is going to open tomorrow, and there will be no tolls or no fines. Well, that is the opposite of what Iran is saying. And it's also the opposite lesson, or it ignores the fact that Iran has learned the lesson over the last six months that it has the control that it has. So it's pretty hard to imagine that they're just going to give that up. And the president is not acknowledging that at all. What about are they going to give up their access to have nuclear weapons?

2:37You know, another piece of that is the president will say and said over the weekend and may have suggested it again today that Iran is not going to have a nuclear weapon and we can do this quickly. It took a year and a half for what was called the JCPOA, the Iranian nuclear agreement that was done during the Obama years to be negotiated. They're nowhere near that kind of an agreement right now. That I can say with full confidence. And the president did say that would be the second stage. Opening the strait would be the first phase. Right. And because that first phase is probably more politically important to him to get that done, because that's the Pandora's box that was opened after the war started.

3:17The war started by Israel and the United States. That was not a problem before this war and is now for the world economy and certainly for the United States. Yeah, an important reminder, you know, as of February 27th of this year, that the strait was open. Yeah, correct. So it would be just going back to what it was before the war. Yeah. And it's just, you know, certainly the president wants that status quo to be returned. But the Iranians have shown really no willingness to go back to the status quo. Jeff, there's been a lot of polling that has been done as of late in the last week or so. And people, the Americans, when it comes to the war, they say 31 % say the Iran war is not worth it.

4:02Or worth it, excuse me. 31 % say it's worth it. 66 % say it's not worth it. This is the Quinnipiac poll. In terms of job approval, 32 % approve of the president's job. 58 % disapprove of it. Polls are polls. Polls are polls. We've seen polls be wrong. I don't know. As someone who covers the White House and the president inside and out, does he look at these things? Does he care about these things? Yeah, for sure he does. And I think one reason or one example of how closely he's following it is he sent out some alternative polls today on his Truth Social account. So he wants people to think, A, that they're better than they are, and B, that he's not paying attention to these other public ones.

4:50He absolutely is. And I would say also as a longtime political reporter that speaking to people in all of these orbits, the Democratic side, the Republican side, regardless of who's in power in the White House, they keep a close eye on these polls because it translates into they translate into votes. And if the approval ratings are high, that would suggest that the midterms are going to go better for his party. The fact that his approval ratings are low is almost certainly going to hurt his party if it doesn't get a turnaround between now and November. I'm glad you brought up midterms because the president also made some comments about what he calls the Save America Act, which is facing some challenges in Congress right now.

5:32If Congress doesn't vote on this before the midterms, is this bill dead? Probably, because, I mean, they could start it up again next year, but a bill has to go through the legislative process within the two-year legislative calendar. So that's going to reset in January if they don't get it done now. And there's very little sign that it's going to get done now. They are trying to bring in some of the aspects of the Save America Act into the budgetary process. But President Trump wants more, and he just doesn't have the votes. Certainly not from Democrats and also not from enough Republicans. And that's been a thorn in his side for weeks now.

6:14Maybe silly question. Is he losing any of his power? It does feel like he still holds so much sway when it comes to what gets done or doesn't get done, Jeff. But I think about, I don't know, is he losing some of his ability to really get certain things done? I don't think that's a silly question. I think that's something we're all watching. And some of the signs of that or some of the signs of whether maybe his power is eroding have come from the senators who are willing to stand up to him. Pretty important to note that those are senators who are on their way out. And the president has emphasized that, that they're lawmakers who he did not endorse.

6:56And therefore, he thinks that they're upset with him for that and they're going to have to retire in January. But even so, they have, Cornon and Tillis, for example, have pushed this issue of the fund as a key negotiating tool over Todd Blanche. And clearly also a thorn in the president's side because he said just now that he wasn't involved in whatever Todd Blanche agreed. Can I throw in Janine Pirro, like her backing off? He just said she made a mistake. She made a mistake, but she did it. No. And I feel like if you'd gone six, seven months ago, I don't know if that would have happened. I don't know.

7:38Yeah. I mean, that's such a great... It's minor, but it's just... It's minor, but it's sort of like destroying part of the... Well, all of the East Wing without giving permission and then talking about it later. It's a metaphor for how things are going for him right now. And it's certainly got to be fascinating in her office because there is a difference between saying something that's not true and pushing that story on Truth Social or in the Oval Office or wherever the president and some of his cabinet members are talking about the reflecting pool. There's an entirely different setting when you have to say it in court.

8:17You know the president's going to react. No doubt. And he has. But she couldn't prove it. And in fact, what she could show is that there were problems with the installation. And that's the opposite of what he wants to hear. But that certainly appears to be the honest truth. Jeff, one thing that is, I think, of interest to our audience is the president's comments about oil companies. Just in the last few minutes, he said that oil firms better cut the retail price. He said that Exxon and Chevron are making too much money. Both of those companies actually extended their declines after the president made those comments.

8:54Exxon Mobil's down about four-tenths of 1%. Chevron down about 1.9%. Can you just explain sort of the tension between a traditional, and I don't want to use the word traditional, but like the idea of a free market and the close relationship that historically many Republican presidents have had with oil companies. Indeed, the close relationship that we've seen all those CEOs at the White House, especially in the wake of what happened in Venezuela. But the president now making comments like this and what the repercussions of that could be. Sure. So a couple of things. Number one, him saying that puts him in almost in democratic territory, because I could certainly imagine hearing a President Joe Biden or a President Barack Obama going out and criticizing oil companies over prices.

9:38So there's a populist aspect to that. I also think it's instructive to remember that President Trump sees the world politically, business-wise, diplomatically through a lens of his own making that's related to him. And right now it's bad for him politically that gasoline prices are so high. So he would like to see those come down, surely to help Americans, but also to help his political prospects and the political prospects of his party. of his party, but it is certainly not in line as many other things are not with traditional Republican orthodoxy in terms of, um, business and the relationship with business.

10:17Again, as we like to say, it's a shame nothing's going on, uh, when it comes to DC. Nothing going on. I just want to point out, um, CNN, uh, reporting that the president is weighing, removing Janine Pirro over the reflecting pool. So this just, um, setting some sources on the president thinking, uh, about it. So there we go. Um, thank you so much. My pleasure. We were looking forward to this. So, so great to have you here. Back at you. All right. Talk to you soon. Jeff Mason, Bloomberg News, White House and Washington correspondent joining us right here in studio. Stay with us. More from Bloomberg Business Week Daily coming up after this.

10:51You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. Our next guest now with some research, always a must read. It's always on the Bloomberg. Everybody talking about it on Wall Street. We talk about it a lot in the newsroom. Torsten Slock is with us, chief economist and partner at Apollo Global Management here in studio. Good to have you here with us. So many different places to start. And I do want to talk about the 60-40 portfolio.

11:27President Trump, we watch and what he's doing with policies. We talk about AI a lot. We're going to get into that. You know, the Fed. And do you just look at it all or like first thing in the morning, what do you want? Do you want to check what's going on in Asia? Like, is it everything that is a priority right now? Yeah, no, absolutely. I mean, the agenda is certainly first the Iran is very important. Are ships going to sail through the Strait of Hormuz or not? How much oil is going to get delivered? That continues to be a very important risk because if we do run dry in tanks, especially in Europe, then we may run out of marine fuel, of jet fuel, of fertilizer, of helium.

12:01and obviously this creates a jump risk in prices, especially for energy. That's still a risk, even though they're like back and forth. I know. It looks like markets look through it. You're right, Carol, because this hasn't been an issue for a while because we've been so busy with the Fed and with AI. But in the background, this continues, unfortunately, to still be very, very important because it literally is the case that we could have some tanks get to critical levels. Yes, there's still, of course, fuel running in the pipes and the systems have to function, but we don't know what that level of critical level of inventory is And the risk is when we don't have 20 % of oil that's supposed to be delivered every day coming through the Strait of Hormuz or Bab el-Mante, the consequence is that we still have this in the background as, again, jump risk in oil prices in particular and also for agricultural prices.

12:44So, yes, this just adds to the other things about Walsh's press conference and AI and all the other things we can talk about. But one more on oil in Iran before we get there. It does seem like the oil market, and we just heard from Jeff Mason, who said, we have no idea what the talks are happening between the US and Iran right now to end this conflict. Oil prices, though, are down 5%, whether we're talking Brent or WTI. Is the oil market getting this right, or is it getting it wrong? Well, it is quite remarkable that oil prices have been through this rollercoaster of going up and down and seem to have a much stronger opinion about whether a deal is happening or not.

13:14Yeah, it does. Whereas people in rates and in economics and in the region, they have a much more nuanced view of, hey, if there is no sign of a deal and if we have a deal, then there is a bigger risk that we could eventually run dry. So that's why the clock is truly ticking on all inventories. And the more that ticks, the higher is the risk. Remember, this is now two months ago that the head of the EIA said that we were six weeks away from Europe running out of jet fuel. Now, we thankfully have not reached that point quite yet. But it's very clear that we literally have zero ships. If I look at my Bloomberg screen, Ekan Hormuz, serious ships coming through the Strait of Hormuz and Babel Mandib at the moment, that is still a very significant risk in the background.

13:52It's difficult to quantify. Who knows if this is tomorrow, next week or next month. But if the Iranians continue with this onto the midterm election, I feel very confident that then we will have the risk that we could see inventory. Remember, Nice Airport ran out of jet fuel three weeks ago. So this is also not just some academic exercise. This is something that's really truly happening, not only for jet fuel, also for marine fuel, other types of fuel. and of course also agricultural products such as fertilizer and helium. Maybe this is why Fed Chair Kevin Warsh was so general, broad, macro. And I want to play something for you because Double Line Capital's Jeff Goodlock called out Michael McKee on X, noting that Mike's question at last week's FOMC press conference, he wrote the greatest financial media moment year to date was Michael McKee teeing up and then delivering, what are you waiting for to Fed Chair Warsh?

14:38Listen up everybody, here's what Mike had to say at the FOMC press conference last week. What vetting did you do of the people that you appointed to the task forces? In particular, given Mark Andreessen's substantial political spending, $25 million in just the past year to back candidates who oppose stricter AI regulation, how can the public be confident that a committee he co-chairs will provide an independent assessment of AI's economic effects rather than one aligned with the interests of the AI industry? Yeah, so I selected 15 incredible subject matter experts to tackle five of the most important questions that if we get the answers right, we're going to do a far better job in delivering.

15:26And if we get the answers wrong, we have a problem. The comfort that I can give you and your listeners is... All right, we're going to get out of that. That was actually not the soundbite we wanted to play, but that was Kevin Warsh with Michael McKee. but Mike was basically saying, what are you waiting for? And Torsten, you obviously watched it. He just was so general macro. What did you take away from Kevin Warsh last week? Well, I think the market reaction speaks to Mike's question, namely, what are we waiting for? Why didn't you just hike rates? The fact that they didn't do that and the market reaction with a very, very steep curve, of course said you should have hike rates.

15:59At least now we're beginning to ask questions in markets about, well, do you have the commitment to raise rates? Do you really think inflation will be 2%. And if you think so, what is the road to getting to 2 %? Are you going to use the balance sheet? Are you going to use the Fed funds rate? Are you going to use tighter financial conditions? He should be able to answer, shouldn't he? He did talk about tighter financial conditions, which may have added a bit to the confusion because it becomes really, really important for the yield curve, whether you pick to do this through a stronger balance sheet, meaning lower balance sheet, whether you do this through higher rates or whether you do this through tighter financial conditions.

16:32Because if you trade rates, you of course will have a strong view on How is it that the Fed is going to achieve the 2 % goal? And you could say in theory that we want to do this through a smaller balance sheet, but we didn't even get an answer to that. So that's why people are now beginning to wonder, okay, there's more volatility in markets. We have a steeper curve, more questions being asked. So therefore, if they don't hike in September, of course, then the market will just ask even more questions about what is now the plan. Can you do it through fewer meetings a year? Well, that's one way, of course, of doing it.

17:00But that doesn't change the facts that the market will still... I'm referring to the New York Times reporting on Friday night that... I saw that. Yeah, that the Fed could have fewer meetings. Yeah, absolutely. And I think that that, of course, would change the game quite significantly if they were to go to the legally mandated only four meetings a year. But it's very clear still that even that debate, the market will still try to price the Fed at every single moment in time. And that basically means that we have a situation where the market constantly needs to think about how might the Fed interpret the incoming data.

17:26Right. Well, I guess what it does, it mean that we hear more from the Fed speakers and their sort of jawboning between meetings. I'm just trying to understand a world we live in with less communication if you want the market to serve as sort of the benchmark for the Fed. I don't know. I think the toothpaste will come out one way or the other. Other FMC members will begin to have speeches where they say, here's what I think. And normally some of these FMC members, they don't get a lot of weight as such from financial markets. But today they are given a lot of weight because if the chair has decided to say, I'm not giving not even forward guidance, but also not framework guidance, then of course, others who are willing to talk about not even framework guidance and forward guidance, but just give a description of the data and talk about how do they think the data could be evolving.

18:13I think that is going to get a lot more weight, which is why when Beth Hammer put something on LinkedIn on a Sunday afternoon, this suddenly gets people sent this to me all Sunday evening and say, what do you think? How should we think about this? And this suddenly becomes really, really important because the market is constantly trying to figure out what is the trajectory of where rates are going. Right, exactly. I want to get to the 60-40 portfolio that we've talked about forever, right? Being broken. Why so? And you have an AI aspect to this. Yeah, so the really important aspect of this discussion is the following.

18:42The 60-40 portfolio was really truly a stroke of genius when it was invented. Because remember, if my stocks go up, normally my bond prices go down. That means interest rates go down. And that means I make money on stocks and I may lose something on my bonds. Vice versa, when the stock market goes down, then bond prices go up and other yields go down. And that means, of course, that I make money either on bonds or make money in equities. Somewhat, somewhat randomly, then pick 60-40. This was the weights. And it made sense in an environment where the business cycle goes up and down. Sometimes I should have in stocks, sometimes we're having rates.

19:16So if that's the case, this was a very good way to balance your portfolio. The problem today is the following, namely that today's stocks are really driven by AI, is not driven so much by the business cycle, and is highly concentrated with the 10 biggest stocks making up 40 % of the basket. So that means that the AI story has become absolutely critical as a driver of the stock market. And the fiscal situation has become a very important driver of the bond market because now we have significant fiscal problems. We have the fact that rates have been going up, the term premium has been going up, and therefore that's also not necessarily a function of what the business cycle is doing.

19:49So suddenly you have two new factors that have been a key driver of equity, namely AI, and a key driver of bond markets, namely fiscal, which are not a function of whether the economy goes up and down. And therefore, we may no longer have the property that you make money on one side and lose on the other, but you may actually lose on both. We've often said, and we've said that when you see the markets, like both stocks and bonds going up in tandem, which is just unusual, right? To see that in any given trade. Having said that, big tech, Torsten, has been disproportionately moving the market even before we started talking a lot about AI.

20:21Is there something different? Is AI, though, that trade on steroids and even further disconnecting us from the business cycle? Yeah, let's think about that exactly at this moment in the 60-40 context because AI, of course, is highly concentrated in equities. So AI better work out, otherwise equities will not go up. So if at the same time, AI companies are also issuing a lot of debt, that takes money out of treasury markets into buy hyperscaler debt. So in that sense, even the bond side of my portfolio is also being impacted. And by the way, it's also now AI. So suddenly I have AI everywhere in equities.

20:52I also have AI in investment grade credit. And by the way, venture capital, 87 % is also AI. So now my whole pie chart is actually all AI. So suddenly there's one factor driving everything I'm doing. And if there's one thing we learned in finance is factor investing. And one factor is driving all returns at the moment. Maybe AI is in equities. AI is in everyone public credit. And AI is also in venture capital. So the best recommendation today is to be not in AI because that gets you away from this one factor that is driving markets at the moment. You did say in your note, the real risk emerges if the AI trade reverses or markets become more worried about government deficits.

21:24in either scenario, both stocks and bonds would face pressure simultaneously, leaving investors with no hedge, which is what you basically said. What happened with situational awareness, the hedge fund? Is that a sign to you of the AI trade reversing? Like, what's your read on that? And I have no idea if Apollo was interested in the assets. Share what you'd like. Yeah. But is that the beginning of a little canary in the coal mine? Well, what was, of course, very unusual about this is that it didn't take much decline in the AI trade. And suddenly there was a blow up. It was a bit of a coincidence that this was the specific fund you mentioned, but it's very clear that the AI trade reversing, there's a lot of levered ETFs at the moment.

22:02There's a lot of people that are having levered bets on AI can only go one way, namely up. And we're now finding out where the underperformings of growth for the last four months is very, very substantial. Value has been outperforming. That's exactly telling you that in a 60-40 framework, growth is just becoming more risky simply because the AI story is beginning to also become more vulnerable. especially with this debate about open source models relative to closed source models. If the Chinese models come and dominate, that will then, of course, take market share from the closed source models.

22:32And the question is, how big is that eating into the market share going to be? The narrative has changed a lot from where we were three years ago. Torsten Slott, thank you so much. And thanks for hanging around. We really wanted to talk with you. He's chief economist at Apollo Global Management, joining us here in studio. You're listening to the Bloomberg Business This Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. Let's get to the hospitality sector because Marriott International shares, we've seen them under some pressure after the company said that room growth for 2026 would likely come in at the lower end of earlier guidance.

23:12Because? Driven by construction delays in the Middle East. Middle East. I mean, we're talking about implications of this war in Iran. It keeps coming and making its way, right? All right. So we've got that stock down about 6.4%. Hyatt was out, though, last Thursday. Yeah. Stock traded down. The company cut its net income guidance for the full year. The guidance missed the average analyst estimate. The S &P Composite Hotels, Resorts, and Cruise Lines Index, that's up about 3 % year to date. So underperforming the broader sector. All right. So let's get to it. Let's talk about the group. Lizzie Dove is with us.

23:41U.S. Gaming, Lodging, and Leisure Research Analyst over at Goldman Sachs joining us here in studio. Welcome, welcome. Thank you. We love this area. It tells you, yes, about the consumer, but it also tells you about business travel and so on and so forth. Walk us through, first of all, the earnings that we've gotten and what it's telling us so far. Well, what's really interesting is there's a bifurcation. We are in one of actually the best travel environments for the U.S. that we've seen in a long time. U.S. RevPar is up 5%. Revenue per room. Revenue per room. That's basically their indication of pricing and occupancy.

24:14Now, what's the problem or the offset to that is two things. One, unit growth is coming in a little bit lighter. So that's new hotel rooms. And two, as you said, the Middle East is an offset there. The pressure there has been higher than expected. And that's impacting not just overall pricing in that area, but also rooms growth and construction. Does that become at a certain point if this conflict goes on for so long? I don't want to say permanent because nothing is permanent, but something that is the next thing to permanent. Companies are saying, OK, we're actually abandoning construction projects there.