The Market Rally and NATO Summit

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or watch us live on YouTube. Stephen Major is Global Macro. are a tradition. He is absolutely on the high ground of a broader disinflationary tendency. Stephen, thank you for your patience and waiting at the NATO meetings. Do we still have in place a disinflationary tendency, or is it unanchored? Well, it looks from the basis of the break-evens that there is the markets believe in disinflation. And clearly, clearly that's coming from the sharp drop in energy prices, or at least from the oil price, first of all. So that is disinflationary, and it goes against the mainstream consensus view that was for higher inflation. And I think that's

why it's so powerful for markets, Tom, because everyone was positioned for higher inflation and higher inflation risk premium, but you just don't see it happening. The market is going the other way. Now, I think that's interesting. Not everyone's agreeing with me because what's happening is people are reading the higher nominal and real yields, which are a function of the dropping inflation expectations, and thinking that means the economy is going gangbusters. What it might be, but that's not what the data is telling me. So it's a different story, I think.

I think the market is calling out the consensus view that we have strong growth forever and ever. I'm going to go to Jan Hotsias here at Goldman Sachs, who's really established a disinflationary trend. What's the history of getting from Banana Republic nominal GDP on down to the disinflation that Stephen Major and Yanhaeus are comfortable with? Well, it's going to be a gentle transition, Tom. And I think that we're all conditioned around these kind of big bang sudden changes in market direction. but in fact it's happening very quietly under the hood because if you look at nominal bond yields, not very much it's happening, but you get so much more information by focusing on the real yield. The real yield has gone up because inflation expectations went down.

Now, my point is the market is priced for a much higher neutral rate than we've had in previous cycles. So just no more hikes and then the possibility of some cuts later this year or next year is the engine behind a possible bond rally starting in the in the third or fourth quarter Stephen we can came into 2026 and I think the consensus call was for a weaker US dollar then of course the war with Iran erupted and that's dynamic has changed here we've got a strengthening dollar here how do you think about the currency markets here where do you see value well yeah we came into this year at one point priced for two or three cuts. We're now closer to one hike. So that's a four, a four, 25 basis point move. That's

100 basis points. So the entire explanation of what's going on with bond yields is just down to market expectations around the Fed. But people are dressing it up as if it's something else, something more structural. I don't buy the anti-globalization or the de-dollarization type of view. I think that one's been really checked out this year. Many people were expecting the dollar would suffer because some of the geopolitical events, some of the sanctions type of risk that has been there these last few years.

Maybe the oil price could be denominated in other currencies that then the dollar. But in fact, I look at it, and the data says dollar transactions are still strong. The majority of trade and transactions in security still goes through the dollar. So the dollar movement is at the moment quite cyclical and structurally strong. I would say that we might lose some of the cyclical support for the dollar in the second half, but the structural foundation is still very much in place. But I don't think there'll be a big

move in the dollar. I think that you'll see a gradual decline in yields, but the dollar's holding up pretty well. Stephen, in the global bond market here, where do you see the best value? these days? Well, look, the cleanest way to express what's happened with real yields is just to buy the tips outright in the five-year part of the curve. Those yields have been moving towards 2%. That's double, most measures of Fed neutrality. A more sophisticated way of doing it is to position in the curve. So to own the bonds in the belly, which could be anywhere between 5 and 10, and just hold them outright, or to sell the longer maturities, say out to 30 year and buy the five year. But I think that there's value in

those kind of trades. And by the way, for me to start recommending steepness is quite a big change. I generally don't like steepness as a trade. But I just think the way the market's priced, you are now paid for owning the belly of the curve. Steve Major, we've got to run here. But, you know, the basic ideas we're really interested in price up, yield down, and all that. what happened to West Ham after Declan Rice left? I mean, West Ham tanks, Declan Rice goes off, he's on England. Can Declan Rice, can they get it done for England, this World Cup? Well, look, that result against Mexico, against the challenges of altitude and the crowd

and the historical track record and all the shenanigans around the start time and all that, I think they did pretty well. And most of the British press is supporting the idea that that was one of the greatest performances of England ever. So it's going to be interesting. There is a path now through to the final. But that's a modest about the problem. Because I find that if I get too optimistic, life has a funny way of checking me. Well, we wouldn't want that.

When I'm rooting for Tottenham, I mean, I'm scarred and I'm terribly scarred here. One final question. Do you see England, France, being a spectacular final? Well, I just hope that you're supporting England now that the U.S. is out, Tom. And I'm hoping that all of America is supporting England now. I think it would be a brilliant final. And it would be a very close call as to who would win. See Paul Howie did that without talking about West Ham?

Yeah. He's gifted. He's gifted to do it. Stephen Major. Thank you so much. Stay with us. More from Bloomberg's surveillance coming up after this. Support for the show comes from public.

If you're actively involved in your portfolio, you probably catch yourself repeating the same actions, buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English, like if the VIX hits 25, buy a put option on the S&P 500, or if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks.

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Okay, not so fun fact. Autoimmune skin conditions are actually on the rise. Cases are climbing nearly 20% every year. I know. Terrible opener for a podcast ad. But here's the thing. I'm Holly Fry and our skin exists precisely because of stats like that. Because more people than ever are living with conditions like psoriasis and

hydrodinitis superativa. And most of them are doing it alone, without answers, without community, without anyone to tell them what the heck is actually going on. You know, not that many people knew about it and I felt kind of alone. Like, am I an outcast? That's where we come in. We talk doctors. We talk appointments that are, well,

A disappointment. We talk about the flare-ups and the breakthroughs. Then we dive deep into the wild, occasionally gross, always fascinating history of how humans have tried to understand our skin over the centuries. Spoiler alert, we did not always get it right. Listen to Season 3 of Our Skin, a personal discovery podcast on the IHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg business app. Or watch us live on YouTube. Right now for Global Wall Street, a really important briefing with Michael Darda of Roth Capital. I look Michael Darta with the question I keep coming up with is the nominal GDP we have. Is it a Darta Banana Republic? look, I mean, how much are we goose in the economy with our inflation and with some form of stable GDP?

Great to be on with you, Tom. Look, 5.4%. That's the number for nominal GDP, not for the last quarter, but for the last two years. It's really been even longer than that. So nominal GDP has been steady, but we've been moving through a blizzard of supply-side shocks. tariffs last year, a big energy spike this year that's now fortunately unwound. And so when you have volatility in the supply side of the economy, that tends to influence nominal growth a lot less. It just changes the composition. Real growth and inflation go in opposite directions when you have a supply side shock. So this backdrop of super stable,

very steady, modest nominal GDP growth is a testament to, to the Fed basically getting it correct under Chairman Jerome Powell. And we know that because we've moved through these shocks without the business cycle slipping away on us. I mentioned this the last time I was on. It goes back to the Bernanke-Gertler-Watson Research of 1997, where they looked back at the upheaval from the oil shocks of the 1970s and concluded that most of that damage was due to the imposition of restrictive monetary policy. Well, the Fed didn't do it. Do that. this time. And Paul, this is the Euro distinction, which is austerity is a comfort for Europe where we don't do that post-Bernank. Yep. Michael, you talked about the real and nominal GDP.

So what is your implicit inflation call here? I've got oil back, you know, 69 handle for WTI crude oil. Is my inflation fears? Can we take that out of the market here? Yeah, I'm fairly optimistic here. A few weeks ago, Fed President John Williams, I thought, gave a really important speech when he talked about the fact that, you know, current settings for monetary policy looked about right to bring inflation back to target. You know, he has a longer horizon looking out to 2027. But keep in mind that if you look at the bond market right now, longer term inflation expectations

are very muted and they stayed muted through the oil shock. And that's based on investors putting their money on the line. And so I think if we can have a little bit of patience here, I know obviously the Fed has overshot the target by five years. But, you know, the last year plus, that's really been due to these supply side disturbances. So as long as they're keeping nominal growth moving in a moderate positive direction, I think these inflation rates are going to come down. On the headline level, I think, you know, we look out over the next few quarters.

we're going to see a pretty significant disinflation there. So, you know, the unraveling of an adverse supply shop, what does it do? It changes the composition a nominal in a favorable way. You get less inflation and you get more real growth. As it stands, the tracking estimates for real growth have actually held up exceptionally well in the U.S. I mean, it's really been a resilient economy. So the question is, is the Fed going to be hiking interest rates now as we move forward with this resilient economy, even with the oil shock unwinding. And we think they're going to be pretty patient

level of unemployment and under employment. You could throw the U6 rate in there as well for some of the conspiracy theorists. And that's, you know, that's recently pulled back a bit, but it's essentially at the same level that we were observing well over a year ago. So stability is the name of the game here. Now, the question comes up, what happens if the unemployment rate keeps falling in the business cycle does heat up as we move into the back end of the year? And that's really going to be the debate, going on to the Fed about whether they should take back some of those emergency rain cuts or not. Michael, before you go, I mean, Paul, the way Michael Darter rules is we get photos. He and the dogs went to Mayork of Spain. Okay. Nice. And so we get, we get, you know, Darta jumping off

cliffs. Did you go to Califigera and jump off a 90-foot cliff? No, Tom, I didn't. But that photo, I think my wife sent, is from Majorca, Spain. And that was just a few days ago. So, yeah, we've had a little bit of fun as well. Like, it's like one of those Apple, you know, those Apple TV movies, clandestine, Michael Darden, black and white. Yep. On the coast of Spain. What did you learn about the Spanish economy, boom, vacation?

Yeah, I mean, obviously, obviously the lens through which I'm looking here is pretty narrow, Tom. But it looks like things are pretty strong, you know, a lot of tourist activity in town. inside Palma and obviously I'm biased, but the food and the culture is top-notch, so big fan. And you know, with Darden, with the way he rolls, you should see the kennel that the dogs go to. It's like the Ritzcarlton kennel. It's unbelievable. Michael Darta, thank you so much. They're a nominal GDV. I can't convey enough folks that constructive tone from DART is not within the zeitgeist right now. Stay with us.

More from Bloomberg's surveillance coming up. after this. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions, buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents

that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S&P 500. Or, if my cash balance goes above $20,000, move the excess into my direct index. You approve the workflow and your agent handles the risk. Monitoring the market, watching for your conditions,

and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. by Public Investing. Rookridge Services by Open to the Public Investing, Inc., member FINRA and SIPC. Advisory Services by Public Advisors, LLC, SEC registered advisor.

Complete disclosures available at public.com slash disclosures. OnDEC is built to back small businesses like yours. Whether you're buying equipment, expanding your team, or bridging cash flow gaps, on deck's loans up to $400,000 help make it happen fast. Rated A-plus by the Better Business Bureau and earning thousands of five-star trust-pilot Reviews. On Deck delivers funding you can count on. Apply in minutes at ondac.com. Depending on certain loan attributes, your business loan may be issued by On Deck or Celtic Bank. On Deck does not lend in North Dakota. All loans and amount subject to lender approval. Okay, not so fun fact. Autoimmune skin conditions are actually on the rise. Cases are climbing nearly 20% every year. I know. Terrible opener for a podcast ad. But here's the thing. I'm hot. And our skin exists precisely because of stats like that.

Because more people than ever are living with conditions like psoriasis and hydrodinitis superativa. And most of them are doing it alone, without answers, without community, without anyone to tell them what the heck is actually going on. You know, not that many people knew about it. And I felt kind of alone. Like, am I an outcast? That's where we come in.

We talk doctors. We talk appointments that are, well, a disappointment. We talk about the flare-ups and the breakthroughs. Then we dive deep into the wild, occasionally gross, always fascinating history of how humans have tried to understand our skin over the centuries. Spoiler alert, we did not always get it right. Listen to Season 3 of Our Skin, a personal discovery podcast on the IHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg business app. Or watch us live on YouTube. We're rocking it with Michael Green. Y equals 19.093 times an exponential function of 0.7218. No. R squared of 62, which is sprightly to say the least.

Michael Green joins us now. Simplify asset management. I love it. The thermodynamics of AI. You know I'm addicted to it. To me, it's a closed loop system and it's got to be some kinetic energy released. Explain the thermodynamics around what I see is a closed loop feeding on itself system. Well, I think it means two separate components. When we talk about the closed loop with AI, what we're really referring to as the financing mechanism. it's allowing the acquisition of customers either through guaranteeing debt contracts or by lending the money directly in the form of equity, investments, et cetera. If you are a customer of NVIDIA and you borrow the money to buy the NVIDIA chips, you don't spend much time negotiating the price.

And it's really that simple. They've been able to manufacture the demand for their own chips. How long that continues and how long it allows the exceptional profit margins? Very, very hard to know. This is the same phenomenon we saw in the late 1990s with Vendon. financing from Cisco. So we know that eventually this runs out. The customers ultimately have to be generating profits. We've got to stop here and review this. Paul's got eight questions. I so, so, so agree that it's a Cisco Redux. Explain to the young, the Cisco moment, 1998, 99.

Just like today when AI is the frontier, then it was the internet or the ability to launch webpages, customer fronts, online storefronts, et cetera. In order to do that in that time period, it was very hardware-intensive build-out. You had to actually build out your own servers. There was no cloud component that you could lease. That's been one of the innovations that's occurred over the last 25 years, for the very simple reason that it's become phenomenally cheap for people to access. In order to obtain that equipment in relatively short supply in the late 1990s, Cisco would have basically a monopoly and was able to lend the money to customers who would pay the most to access it. The validity of those debt contracts ultimately became very much in question

when we discovered that websites built at exceptionally high cost offering subsidized access to consumer products was not a particularly good business. And as that collapsed, we ultimately discovered that the profits that Cisco had been reporting were radically overstated. They retreated, and we had what we called the dot-com cycle. Whether that plays out this time or not, I'm not entirely certain because I'm not entirely certain. It's the exact same mechanism, as we've discussed over and over and over again. There's an alternate source of the bid this time. It really is just the American employees, plowing their money into 401Ks,

that is assisting and driving the valuations and performance that we're seeing. And that in turn creates the incentive that says, hey, you should spend a ton of money here. So what's the AI play vis-a-vis China? I feel like we're not paying enough attention to what China is doing with AI. but I just feel like they're there in a big way. And I just don't know when we're going to see it, how we're going to see it. Well, I think that's really one of the critical things to remember. It's that our competition in 1999 was Canada, right?

It was Nortel. Canada's a wonderful country. It's quite large. Got your bringing back memories. I know. Isn't it fantastic? That's what happens when you get old. But we sit here and reminisce about events gone by.

The unfortunate reality is that we're not paying enough attention to what's happening in China. And China has responded as life always does when faced with restrictions. They have been limited in their ability to access chips. That has forced them to focus on efficiency. It's forced them to reduce their reliance on American technology, and they're proceeding at an astonishing rate. Jim Chanos lectured me on the Neo Cloud. I think a week and a half after that lecture,

we see Meta being very Neo Cloud and others. The NeoCloud, to me, is basically a construct. AI server. It's like an AWS and Amazon Web Services, right? Absolutely. To me, this overwhelms everything out there. I mean, it's a no-brainer. Am I naive? Well, what it's telling you is that many of the individuals who purchase those incredibly expensive chips with extraordinarily high gross margins, can't figure out what to do with them. Thank you. So they're basically putting them into the secondary market. This is no different than what eventually happens in markets like gold. where secondary sales ultimately swamp primary production as prices pushed to new all-time highs.

So we are seeing effectively, you know, incremental supply come into the market, not just from the primary sales from Nvidia and others, but now from their customers who in many ways are competing with that underlying demand. So all I, when I listen to the Jensen Wongs of the world and other folks within the AI ecosystem, all I hear is insatiable demand for a compute, for just AI capabilities. I don't know how to parse that other than, I think these guys know what they're talking about, but I don't know.

Well, listen, I think they know what they're talking about as well. And certainly to their face, they're actually seeing that. Among other things, if you're meta or your XAI, for example, that wants to maintain optionality to that, you're not going to cancel your contracts. And in fact, you're going to try to keep your place in line. You're not entirely sure how this is going to play out. And the costs of doing so are relatively low.

So I have no doubt that from Envidio's perspective, they see a surplus of demand. There's also the simple reality that companies trading at very high valuations have to sell a story to their customers or to their investors that say, hey, here's why we were worth so much, right? We're going to sell cars to the AI universe. Whether that works out or not, we can't possibly know yet. I made a chart today for Richard Clarend of CPI, back 20 years, folks, back to Alexis. Christopher's youth. And I looked at a 2% goal for the Fed. And you know, I was surprised on a four-year presidential moving average, we actually succeeded at some form of 2% inflation. And then things changed. What's the permanence of this new higher inflation after your earth-shaking study 90 days

ago of affordability in America? Americans are living this in real time. It's a It's not like the old days. It's not like the old days. And part of the challenge that we are facing, what you're referring to is the piece I released last November, my life is alive, the $140,000 poverty line that got an incredible amount of pushback, but is now actually increasingly being shown to be correct. And so we are actually seeing growing awareness that the affordability crisis is very real. There are two key criteria to understand.

One is the way you and I think about inflation is a year over year change in the price level. And that makes perfect sense from an economic standpoint. The problem is once you're underwater, once you're spending exceeds your income, if your income and inflation match, which the Federal Reserve or the BLS would look at and say, hey, this is fantastic. Real wages were flat or real wages grew very slightly. You're still underwater and you're potentially even more underwater. And that is really creating conditions under which more and more households are facing the life choices

that they need to make under a calendar basis. Do we get married? do we have children, et cetera, and choosing to opt out of that process. That's causing social frustration. The desire is not gone. The ability is increasing. I would say, Paul, the major debate we're having is this, do we get back to some form of disinflationary tendency?

I mean, away from the politics into November. Well, what we saw just from the pandemic is that price increases. I'm not seeing, I see occasionally some prices coming down, but it's just talking about the rate of inflation from a higher base. and that's where I think most people have a lot of problems. And that's what I was referring to with the price level, right? We've had this conversation with people and people feel that we are gaslighting them and we say that inflation is by and large transitory.

In all seriousness, when we have a war in the Middle East and gasoline prices spike to get a CPI number that is coincidentally timed almost perfectly to the low at the end of February and effectively the high that we've experienced at the end of May, you're going to see inflation. There's no way around it. To only get 4% inflation as measured on a year-over-year basis is actually pretty remarkably low relative to the history that we would have expected.

Go back and look at the 1990s, for example, with the invasion of the attacks against Iraq and Desert Storm. You're watching the football? I'm not watching the football. Stay with us. More from Bloomberg's surveillance coming up after this. Support for the show comes from public.com. If you're actively involved in your portfolio,

you probably catch yourself repeating the same actions, buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S&P 500.

Or, if my cash balance goes above $20,000, move the excess into my direct index. You approve the workful, and your agent handles the risk. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API.

Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by Public Investing. Brokridge services by Open to the Public Investing Inc. Member Finra and SIPC. Advisory services by Public Advisors, LLC, SEC registered advisor. Complete disclosures available at public.com slash disclosures. OnDEC is built to back small businesses like yours.

Whether you're buying equipment, expanding your team, or bridging cash flow gaps, OnDex loans up to $400,000 help make it happen fast. Rated A-plus by the Better Business Bureau and earning thousands of five-star trust pilot reviews, On-deck delivers funding you can count on. Apply in minutes. at on deck.com. Depending on certain loan attributes, your business loan may be issued by OnDec or Celtic Bank. OnDec does not lend in North Dakota. All loans and amount subject to lender approval. Okay, not so fun fact. Autoimmune skin conditions are actually on the rise. Cases are

climbing nearly 20% every year. I know. Terrible opener for a podcast ad. But here's the thing. I'm Holly Fry and our skin exists precisely because of staff. like that, because more people than ever are living with conditions like psoriasis and hydrodinitis superativa, and most of them are doing it alone, without answers, without community, without anyone to tell them what the heck is actually going on. You know, not that many people knew about it, and I felt kind of alone, like, am I an outcast? That's where we come in. We talk doctors. We talk appointments that are, well, a disappointment. We talk about the flare-ups and the breakthroughs.

Then we dive deep into the wild, occasionally gross, always fascinating history of how humans have tried to understand our skin over the centuries. Spoiler alert, we did not always get it right. Listen to season three of Our Skin, a personal discovery podcast on the IHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

You're listening to the Bloomberg Surveillance, podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg business app or watch us live on YouTube. The punditry is in full force. People that wandered by, they read three books and they're an expert. Or you live it. Rose Gauten Miller is the kind of diplomat that we don't have enough of. They're in retreat in this modern age. She's the former deputy secretary general. of NATO, the former Undersecretary of State for arms control and international security. Rose, thank you so much for joining us for a four-hour good conversation.

I look, Rose. I look, Rose, at the cacophony here. So what can NATO do off of the Atlantic Charter of, I think it was 1941, to the new modern NATO to help with arms control from the fifth? border all the way down to Tehran? Well, the first thing that NATO can do is help to resolve this war of Russian aggression in Ukraine. And that is the key issue that will have to be resolved before we can think about a European security architecture that I hope will provide mutual predictability and stability for everyone.

And that includes the aggressors, the Russian Federation, but obviously must include every NATO member and the NATO partner states across Europe and right up to the borders of Asia, as you've said. Turkey, of course, is a NATO member state as well. And so their security and stability relies on NATO, as we see from this Ankara summit of NATO going on this week. Rose, how do you think NATO views the U.S. here these days? It feels like, you know, when the U.S. went into Iran, the reported that we did not really consult with our NATO allies, anything NATO is viewing the U.S. these days? Apparently, NATO is viewed less well by the U.S. public than it has been historically.

When I was Deputy Secretary General and NATO was celebrating its 75th birthday at the time, NATO was really quite popular, 70% or more of the U.S. public. That number is dropped now into the 50s, evidently. But I think that is likely because of the very strong criticism that Donald Trump has directed at NATO. And as you know, he's unrelenting on the airwaves and in social media. So people are listening to that. And they say, hey, well, maybe NATO isn't helping us so much. But as I see it, NATO is, in fact, taking on the responsibility for conventional defense in Europe,

just as the Trump administration has demanded. And so I do think that in general, NATO is serving the U.S. interests well. And honestly, also, I think the U.S. public is going to bounce back about NATO when they see the results of Trump's demands to spend more on their own defense. I look at this, Madam Secretary, and I say to myself, well, the president announced with Mr. Recep Tayyip Erdogan an hour ago that he's cured nine wars or eight wars, Paul, I can't remember the count right now. What everybody thinks about domestic politics is our military, overextended through Washington, through, say, the Navy in San Diego, through our NATO effort in

Brussels? Is America's military might just simply overextended? It is kind of amusing because Trump claimed when he was running for office that he would never launch a war in the Middle East, a war of choice in the Middle East, but that's exactly what he did. So, well, there goes campaign promises. I guess many politicians are guilty of that. But in any event, you know, the U.S. Armed Forces were designed in the wake of World War II to help provide for security around the world. And it's that security and predictability on which the health of our modern economy is based. If it weren't for the fact that the U.S. Navy was operating in both the Atlantic and Pacific, really around the world. We wouldn't see the straits through which our trade passes.

We wouldn't see those open. we wouldn't see freedom of passage for commercial ships everywhere. So there's a good reason why the U.S. armed forces are extended around the world. They have provided essential peace through this post-World War II era. Now the question is, what's going to happen? Trump says he wants to shift the balance to the Indo-Pacific in order to confront China, and the Europeans are left to defend themselves. That is, I think, something that they can take on because they are,

strong economies, and they have been, frankly, freeloading on the United States, not spending enough on their own defense. So let's take the bright side and say they're finally shouldering some responsibility. Rose, with your experience, how do you think the situation with Ukraine and Russia plays itself out in over what time frame? I take very seriously the public stance that Volodymyr Zelensky has taken in recent days. And I've long seen how the Ukrainians, been able to deny the Russian sea control in the Black Sea. You know, they use their small sea drones, like, you know, they're basically like motorboats with explosives on them to really destroy major naval ships of the Russian Federation. And that's blocked Russia out of the

Black Sea. And they've also stopped them on the battlefield. So now Volodymyr Zelensky says, we're taking to the air and this war will be won with this missile duel that's going on between Russia, and Ukraine. And Ukrainians are very good missile players. They have shown that. So the question now is, what about air defense? They are not doing well defending against ballistic missiles because the United States and its allies are not providing them patriot missile defense interceptors. So the problem now is can they improve their missile defenses? They're doing great against drones. You know, they've mastered that. And in fact, the Middle East, other places are clamoring for their drone defense systems. But they need help to do.

defend against these bigger ballistic missiles. One final question. You are expert. I think of Marshall Goldman, Angela Stent, and the others that have advantaged us over the years in conversation. What's after Vladimir Putin? Well, it could be more of the same. Unfortunately, he has created a system in Russia that is very much based on the security

services, and they have brought on a younger generation. So it could be a younger Vladimir Putin clone. have to see. My hope is that they have quite a few skilled, more technocratic leaders, people who really know, for example, the international economy and banking system, people who care about the economy of Russia being healthy going forward. So perhaps it could be one of those more technocratic types, less security service, less KGB type. And that I think would be a good, perhaps, outcome in general. But I worry that what we are seeing is the continuation of a system of security service, KGB rule in Russia, which ends up being a kind of mafia-style leadership. And I fear that

for the future of Russia. This has been the highlight of our day with all that we've done in Ankara with Oliver Crook and Anne Re Horton. Deputy Secretary, thank you so much, Rose Godin-Muller's service to the nation in too many instances, including the Deputy Secretary General of the North Atlantic Treaty organization. This is the Bloomberg Surveillance podcast, available on

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